The launch of Economic Stimulus Plan (ESP), a pledge by the People’s Democratic Party, comes into effect with the handing of Nu 2.1 bn to financial institutions in Bhutan on April 9.
Gracing the event, Finance Minister Namgay Dorji assured that ESP task force and the government took several months to work out the modality of implementation of the ESP.
The first phase of ESP aims to improve market liquidity by preventing further pressure on the current account deficit. The mode of injection of money is as subordinate debt, where banks will borrow money from the government for a period of 10 years at an annual interest rate of 6 % and to make the money available to the people and to improve the economy.
Bank of Bhutan and Bhutan National Bank received the highest with Nu 500mn each followed by Bhutan Development Bank with Nu 430mn. The Druk PNB and T-Bank received Nu 150 mn each. The Royal Insurance Corporation of Bhutan received Nu 250mn and Bhutan Insurance Limited got a sum of Nu 120mn.
The Business Opportunity and Information Center (BOIC), will receive Nu 1.9 bn in the second phase of implementation of ESP. As a revolving fund, the BOIC will receive 1.5 bn to uplift cottage and small industries and Nu 400mn will be pumped into non-formal rural activities as in micro-enterprises, and followed by Nu 1 bn as special support scheme through the ministries.
“The rapid socio-economic development, indeed, built so much demand for public spending and created a huge credit deficit and correspondingly the current account deficit, particularly with the government of India from where we import 90% of consumptions,” Finance Minister said.
Further, Lyonpo added that because of the credit deficit and current account deficit, the government has had to take hard policy decisions of restricting import and RMA took to initiating hard monetary policy decision to restrict the credit system in the market.
Joint Secretary of Finance Ministry, Nim Dorji, said the major activity is the liquidity injection into the financial institutions in order to improve the planning capacity of the financial institution for stimulating economic growth.
Further, he added that the private sector is at the core of all economic activities and the success of ESP will be the liquidity injection into the financial institutions which will be used by the private sector for increasing productivity and capacity to generate economic growth.
“Business committee has the huge responsibility in ensuring that the liquidity injected is used for the better purpose to stimulate economic growth,” he added.
Currently, Bhutan received Nu 3.7 bn of the Nu 5bn for ESP from India. The ESP is designed to be implemented outside the 11th Plan and help those facing serious financial crunch like, small business owners, contractors, traders, shopkeepers, and the common people.
An additional capital shall be given as loan to productive sectors that contribute to the following national goals: youth employment, SMEs, entrepreneurship and startup business, agro-business, import substitution, construction, housing, green business development, and women empowerment.