Financial Statements of the Royal Government of Bhutan for the Year Ended 30th June 2013 207

ANNUAL FINANCIAL STATEMENTS

of the ROYAL GOVERNMENT of BHUTAN

for the YEAR ENDED 30 JUNE 2013

Department of Public AccountsMinistry of Finance

Financial Statements of the Royal Government of Bhutan for the Year Ended 30th June 2013 1

ANNUAL FINANCIAL STATEMENTSof the ROYAL GOVERNMENT of BHUTAN

for the YEAR ENDED 30 JUNE 2013

Department of Public AccountsMinistry of Finance

Financial Statements of the Royal Government of Bhutan for the Year Ended 30th June 2013 2

i

iii

iv

v

List of Abbreviations

ADB Asian Development Bank

AFS Annual Financial Statements

BDBL Bhutan Development Bank Limited

BFA Budget Fund Account

BHPC Basochhu Hydro Power Corporation

BHTF Bhutan Health Trust Fund

BoBL Bank of Bhutan Limited

BTL Bhutan Telecom Limited

CDG Constitutional Development Grant

CHPC Chhukha Hydro Power Corporation

CIT Corporate Income Tax

CFA Consolidated Fund Account(Changed from Government Consolidated Account)

RoD (Danida) Representation Office of Denmark

DGPCL Druk Green Power Corporation Limited

DNB Department of National Budget

DPA Department of Public Accounts

DRC Department of Revenue and Customs

FRR Financial Rules and Regulations

FY Fiscal Year

GDP Gross Domestic Product

GNHC Gross National Happiness Commission

GoA Government of Austria

GoD Government of Denmark

GoI Government of India

IDA International Development Assistance

IFAD International Fund for Agriculture Development

JICA Japan International Cooperation Agency

KFAED Kuwait Fund for Arab Economic Development

KHPC Kurichhu Hydro Power Corporation

MYRB Multi-Year Rolling Budget

NPPF National Pension and Provident Fund

PEMS Public Expenditure Management System

PFA Public Finance Act

PIT Personal Income Tax

RE Rural Electrification

RGoB Royal Government of Bhutan

RMA Royal Monetary Authority

SA Spending Agencies

THPC Tala Hydro Power Corporation

WB World Bank

WMA Ways and Means Advance

T-Bills Treasury Bills

Financial Statements of the Royal Government of Bhutan for the Year Ended 30th June 2013 vi

Financial Statements of the Royal Government of Bhutan for the Year Ended 30th June 2013 vii

CONTENTS Page No

i Statement of Responsibility i

ii Auditor Generals Report iii

iii List of Abbreviations v

iv Table of Contents vii

1 Introduction 1

2 Overview 1

3 Budget Estimates,Actual Outcomes and Financing 2

4 Receipts & Payments 3

5 Government Receipt by Sources 4

5.1 Internal Revenue 5

5.2 External Grants 7

5.3 Borrowings 7

5.3.1 Internal 8

5.3.2 External 8

5.4 Recovery of Loans 9

5.5 Other Receipts &Payments 9

6 Operational Results 10

6.1 Expenditure Growth 10

6.1.1 Current Expenditure 11

6.1.2 Government Subsidy Payment 13

6.1.3 Interest Payment 14

6.1.4 Capital Expenditure 18

6.1.5 On-Lending 20

6.1.6 Loan Repayment 20

6.1.7 Sector wise Expenditure 24

7 Government Debt Position 26

7.1 Domestic Debt 26

7.2 External Debt 26

8 Government Equity Holdings 35

9 Government Guarantees 35

10 Consolidated Fund Account 39

11 Government Budget Fund Account 40

12 Refundable Deposit,Revolving and Trust Funds 41

13 Current Deposits Account 41

Financial Statements of the Royal Government of Bhutan for the Year Ended 30th June 2013 viii

GRAPHS

I Government Receipts by Sources 5

II Total Expenditure for FY 2011-12 & 2012-13 11

III Internal Revenue and Current Expenditure comparison 12

IV Statement of Interest payments 14

V Repayment of Principal loans 21

VI Summary of expenditure by Sectors 25

TABLES

Table 1 Budget and Actual Comparison and Financing 3

Table 2 Consolidated Receipts &Payments Statement 4

Table 3 Government Receipt by Sources 5

Table 4 Summary of Revenue Collection 6

Table 5 International Assistances (Grants) received 7

Table 6 International Assistances (Loans) received 8

Table 7 Recovery of Loans for the FY 2012-2013 9

Table 8 Statement of Other Receipts &Payments 10

Table 9 Summary of Expenditure 11

Table 10 Current Expenditure & Internal Revenue Comparison 12

Table 11 Government Subsidy Payment 13

Table 12 Expenditure on Interest Payment 14

Table 13 Interest Payment on Loans - By Lender 15

Table 14 Interest Payment on Loans By RGoB & Corpn. 16

Table 15 Capital & Repayment Expenditure comparison with Grants & Borrowings 19

Table 16 Statement of On-Lending 20

Table 17 Repayment of Principal Loans Summary 20

Table 18 Repayment of Principal Loans - By Lender 21

Table 19 Repayment of Principal Loans - By RGoB & Corpn 23

Table 20 Summary of Expenditure by Sectors 24

Table 21 Summary of Revised Budget and Actual Expenditure 25

Table 22 Statement of Outstanding Loans Summary 27

Financial Statements of the Royal Government of Bhutan for the Year Ended 30th June 2013 ix

Table 23 Statement of Outstanding Loans Detailed 29

Table 24 Statement of Government Equity Holdings 36

Table 25 Statement of Government Guarantees 38

Table 26 Reconciliation of Consolidated Fund Account 39

Table 27 Reconciliation of Govt. Budget Fund Account 40

Annexure 1 - Credit as per Cashbook but not in BOB 40

Annexure 2 - Credit as per BOB but not in Cashbook 40

Table 28 Statement of Refundable deposit, Revolving and Trust Funds 41

Table 29 Summary of Current Deposits Account 41

SCHEDULES

Schedule 1 Schedule of Revised Budget and Actual Outcomes 42

Schedule 2 Schedule of Expenditure Summary by Object Class 52

Schedule 3 Schedule of Loans received: by Lender 55

Schedule 4 Schedule of Grants received: by Donor 56

Schedule 5 Schedule of Expenditure Summary by Function 94

Schedule 6 Schedule of Non-Revenue Deposits 145

Schedule 7 Schedule of Other Recoveries and Remittances 146

Schedule 8 Schedule of Revenue Receipts and Remittances 154

Schedule 9 Schedule of Miscellaneous Receipts and Payments 162

Schedule 10 Schedule of Dishonored Cheques 170

Schedule 11 Schedule of Advances and Suspense 172

Schedule 12 Schedule of Government Current Deposits Account 180Schedule 13 Schedule of Tax Revenue 195Schedule 14 Schedule of Non-Tax Revenue 197Schedule 15 Statement showing Actual outcomes during 10 FYP 199Schedule 16 Notes to Accounts 200

Financial Statements of the Royal Government of Bhutan for the Year Ended 30th June 2013 1

1. INTRODUCTION

The Annual Financial Statements (AFS) reporting on the budgetary operations of the Royal

Government of Bhutan (RGoB) for the Fiscal Year (FY) 2012-13 has been prepared by the

Department of Public Accounts (DPA) as per the provisions of the Public Finance Act, 2007 (PFA

2007), Public Finance (Amendment) Act 2012 and the Financial Rules and Regulations, 2001

(FRR 2001).

The financial statements are based on the monthly accounts of the budgetary bodies recorded

in the Public Expenditure Management System (PEMS) and information received from other

relevant agencies and organizations. The statements and schedules presented in the AFS

reflect the financial position of the RGoB as on 30th June 2013.

2. OVERVIEW

The FY 2012-13 started with an approved budget of Nu. 33,486.239 million and an estimated

resources of Nu. 31,891.042 million, resulting in a fiscal deficit1 of Nu. 1,595.197 million and

a resource gap2 of Nu. 670.431 million. However, with an actual realized resources of Nu.

30,656.117 million and the actual outcome of Nu. 34,900.809 million, the FY 2012-13 ended with

a fiscal deficit of Nu. 4,244.692 million and a resource gap of Nu. 3,752.386 million. The fiscal

deficit and resource gap is about 4.1 percent and 3.6 percent of GDP3 respectively.

The total Government expenditure during the FY 2012-13 amounted to Nu. 36,527.815 million

accounting for 34.7 percent of the GDP and registering an increase of 24.9 percent from the

previous FY. The variance between the revised budget and the budget outturn was 7.2 percent.

The Government debt stock outstanding as on 30th June 2013 was Nu. 101,310.193 million

equivalent to US$ 1,704.842 million4 which is about 97 percent of the estimated GDP. The

outstanding Government Equity Holdings and Government Guarantees as on 30th June 2013

are Nu. 48,012.396 million and Nu. 2,587.693 million5 respectively.

1 Fiscaldeficit/surplus=(taxes+feesandincomefrompropertyandenterprises+ proceedsfromsaleofland and other capital assets +recovery ofon-lending +grants) (current expenditures + capital expenditures + lending). Source: FRR2001.

2 Resource gap = (taxes + fees and income from property and enterprises + proceeds from sale of land and other capital assets + recovery of on-lending + grants + project tied borrowings) (current expenditures + capital expenditures + on-lending + repayments).

3 GDP as per National Statistics Bureau is Nu. 104,473.0034 Refer Table 22 & Table 23.5 Refer Table 24 & Table 25.

Financial Statements of the Royal Government of Bhutan for the Year Ended 30th June 20