All budget requests for spending on new public projects were rejected for the period bridging the current 2017-18 fiscal year and the new 2018-19 fiscal year, which begins October 1. As instructed by U Htin Kyaw, the interim budget will cover only necessary spending on existing projects.

This will also be the case for the Region and State budgets. “We have rejected all budget requests for new projects by the industries. All capital expenditure for new projects will be included in the 2018-19 budget,” Budget Department director general Daw Nwe Nwe Win said. Expenditure on new projects will only be included in the new budget for 2018-19, said U Zaw Pe Win, economic adviser for the Pyidaungsu Hluttaw Joint Public Account Committee.

Budget deficit

The approved interim budget, which includes the spending needs of the various ministries, government departments and the Regions and States, is estimated to total K10.6 trillion. In comparison, tax revenues for the same period are expected to total K8.5 trillion.

That implies a budget deficit of around K2.1 trillion for the period, or 6.5 percent of GDP, which exceeds the government’s target of keeping the deficit within 5pc of GDP.

However, U Zaw Pe Win said the deficit is “inevitable” given the number of ongoing projects that need funding.

Daw Nwe Nwe Win added that most taxes will be collected only at the end of the period and this has resulted in steeper expenditure compared to revenue. Also, some large companies do not make money within six months.

Government spending

Last month, it was also announced that eight state-owned enterprises (SOEs) with positive balances in their Other Accounts (OAs) will be permitted to utilise those funds to cover all operational, capital and debt expenditure during the interim period, said Daw Thida Tun, Deputy Director General from the Budget Department. The SOEs can use funds from their OAs to cover necessary expenditure if public funds allocated to them under the budget are insufficient.

Of the 20 Myanmar SOEs, eight operating in the natural resources sector are now allowed to use their OA funds, while the government will partially support 11 SOEs.

Only the Electric Power Generation Enterprise will receive full budget support during the interim period. The allocated amount of funds, which will be used to continue developing infrastructure needed for power generation and distribution, was not disclosed.

Out of the 23 government ministries, budget support has been allocated to all but two. The Ministry of Defence and Ministry of Planning and Finance were allocated with about a quarter of the total budget, followed by the Ministry of Education and Ministry of Health and Sports, which were given around K1.2 trillion to cover their spending.

In 2017-18, the Ministry of Planning and Finance spent a total of K4.8 trillion, while spending on defence totalled some K2.9 trillion. Meanwhile, around K2.8 trillion was allocated to education and health, according to official data.

“Expenditure on education and health has increased year after year in accordance with the government’s policies and there are no cuts to spending in these two areas during the interim period,” said U Zaw Pe Win.

“Right now, we will focus on the necessary infrastructure. Electricity is important. We will continue to construct roads. More expenditure is needed to build schools and hospitals need to be of good quality. As such, some existing projects, such as hydropower projects, have been delayed to free up funds for these other projects,” U Aung Min,Vice chair of the Joint Public Account Committee, said.

Based on the population size, area and state of development of each Region and State, a total of K100 billion will be allocated to Shan State, the highest amount among all the Regions and States. Meanwhile, Sagaing, Tanintharyi and Rakhine states will receive K88 billion, K72 billion and K70 billion, respectively.

As Yangon and Mandalay draw the highest local tax revenues, the two regions have been allocated minimal funds from State budget.

Source: https://www.mmtimes.com/news/fiscal-deficit-expected-interim-period-despite-halt-new-projects.html