The Bhutanese Leading the way.
Reserves at USD 1.121 bn
The total estimated appropriation for FY 2026-27 amounts to Nu 153.296 billion (bn) distributed across recurrent expenditure (41.1 percent), capital expenditure (47.3 percent), lending (0.7 percent), and repayment (10.9 percent). With overall resources projected at Nu 110.280 bn, the fiscal deficit stands at 6.5 percent of GDP.
Recurrent expenditure is estimated at Nu 63.0285 bn, reflecting a 7.9 percent increase over the FY 2025–26 approved budget. The rise is driven mainly by a 4 percent inflation adjustment, onboarding of Annual Maintenance Contracts (AMCs) for whole-of-government systems, allocation for the Population and Housing Census 2027, and preparations for the Fourth Local Government Elections.
Capital expenditure is estimated at Nu 72.536 bn, accounting for 29.6 percent of the total capital outlay under the 13th Five-Year Plan (FYP). This marks an increase from 16 percent in FY 2024–25 and 25 percent in FY 2025–26, reflecting a shift from preparatory activities to full-scale implementation. Financing for capital expenditure includes 42.3 percent grants from development partners, 34.9 percent borrowings, and 22.8 percent from internal resources.
On-lending is estimated at Nu 1.0485 bn, mainly financed through ADB loans. Major allocations include the Phuntsholing Township Development Project (Nu 652.7 mn), the Green and Resilient Affordable Housing Sector Project (Nu 376.4 mn), and the Green Power Readiness Enhancement Project (Nu 19.4 mn), focusing on infrastructure, housing, and energy preparedness.
Principal repayment is estimated at Nu. 16.682 bn, covering obligations to GoI, ADB, GoA, IFAD, JICA, and IDA, including the maturity of government bond series RgoB010 worth Nu 2.996 bn in September 2026.
The social sector receives the largest allocation at Nu. 47.365 bn (31 percent), followed by the economic and public services sector at Nu. 40.395 bn (25 percent). General public services and national debt service are allocated Nu 28.442 bn and Nu 28.810 bn respectively, each accounting for 19 percent.
Transfers through grants and subsidies account for 1.3 percent of total expenditure. Grants include Nu. 266.4 mn to non-budgetary agencies such as the Bhutan Chamber of Commerce and Industry, Bar Council of Bhutan, Alternative Dispute Resolution Center, and Bhutan Red Cross Society. Subsidies include operational support to BBSCL, interest subsidies to Bhutan Agro Industries Limited, Druk Air, and NHDCL, along with rural insurance and domestic power tariff support.
The total budget appropriation of Nu 153.296 bn is submitted as the Budget Appropriation Bill, comprising recurrent, capital, on-lending, and principal repayment components.
The economy grew by 7.5 percent in 2024, driven by strong performance in services, particularly hotels and restaurants, public administration, finance and insurance, and trade. Growth is expected to rise to 8 percent in 2025, supported by services and industry, before moderating to 6.3 percent in 2026 due to global headwinds, commodity price pressures, and supply chain disruptions. Growth is projected to recover to 7.6 percent in 2027, led by hydropower development and tourism recovery.
Public consumption is projected to decline from 20.7 percent of GDP in 2024 to 18.9 percent in 2027. Private consumption remains dominant, rising to 50.8 percent in 2025 before moderating due to inflation and recovering later. Government investment rises from 6.8 percent of GDP in 2024 to 12.5 percent in 2027, while private investment remains stable at around 40 percent of GDP.
Exports are projected to increase to 51.4 percent of GDP in 2026 before easing, while imports remain high, peaking at 70.5 percent in 2026 due to fuel price pressures linked to geopolitical tensions.
Agriculture is projected to grow at 3.3 percent in 2025 and stabilize at 1.6 percent in 2026–2027, constrained by climate risks and low productivity. The industry sector is expected to expand strongly, driven by electricity, manufacturing, and construction, supported by hydropower projects and industrial parks. The services sector is expected to slow to 4.2 percent in 2026 before modest recovery in 2027, though trade, transport, and financial services remain resilient.
Inflation averaged 3.5 percent in 2025 and rose to 5.6 percent in February 2026, driven by food and non-food prices and rising fuel costs. Money supply (M2) is projected to grow by 20 percent in 2025–26 before moderating, while net foreign assets and domestic credit show strong but stabilising trends.
The current account deficit is projected to widen to -20.1 percent of GDP in 2025–26 before improving and widening again by 2027–28. The trade deficit remains substantial, reflecting import dependence. The capital account rises sharply due to grants and hydropower-related inflows, while the financial account reflects increased FDI and external borrowing.
Gross international reserves remain strong, rising from USD 799.6 mn in FY 2024–25 to USD 1.1218 bn in FY 2025–26, and projected to reach USD 1.5408 bn by FY 2027–28, covering up to 39 months of essential imports.
GDP per capita increased from USD 3,965.2 in 2023 to USD 4,347.1 in 2024 and is projected to reach USD 5,279.7 in 2026. GNI per capita also shows steady growth, supported by domestic output and external inflows including hydropower earnings and remittances.
Unemployment remains stable at around 3.5 percent, with projections showing a slight decline in 2026 before a marginal rise in 2027. Agriculture remains the largest employer at 43.5 percent, followed by services at 34.2 percent and industry at 14.3 percent, with gradual shifts expected toward industry and services over time.
