The Bhutanese Leading the way.
It may be interesting or even entertaining to watch or read the news on unfolding international political developments with the United States of America (USA) intent on withdrawing from international bodies, tariff wars between major economies, the European Union (EU) planning to rearm etc., but a closer look shows that all these events hold the potential to impact Bhutan, particularly in terms of international grants and soft loans that come our way.
In fact, the 20th January 2025 withdrawal of the USA from the World Health Organization (WHO) has already had a direct budgetary impact on Bhutan, as the USA was, by far, the largest contributor to WHO.
The Bhutan-WHO office wrote to the Ministry of Health and the Ministry of Finance in February 2025 talking about a need to bring about a minimum of 25% cut (Nu 205 million (mn) approx.) in its funding and programs, and perhaps even more, if needed
The government, itself, is worried enough, and will be carrying out two studies to look at the impact of the changing geopolitics and global policy shifts on the 13th Plan and beyond, and how can Bhutan prepare.
This paper did its own analysis, and the biggest danger for Bhutan, from ongoing global events triggered by the new foreign policy of the Trump administration and the reactions to it, is on our grants and soft loans from third countries, multilateral agencies and international Financial Institutions.
Other than India, the grants from all others, like EU, Japan, the United Nations (UN), the World Bank (WB), the Asian Development Bank (ADB), the Green Climate Fund (GCF), etc., come to USD 322.138 mn or around Nu 28 billion (bn) (USD 1 = Nu 86.96) for the 13th Plan.
Bhutan is also taking soft loans from the WB, ADB and International Fund for Agricultural Development (IFAD) of USD 427.494 mn or Nu 37.174 bn (see box).
As seen from the WHO example, the first thing that Bhutan needs to worry about is the complete US withdrawal from or downsizing of its role in multilateral agencies and international Financial Institutions where the USA is the biggest contributor, and often the founder too.
On 3rd February 2025 US President Trump issued an executive order saying that within 180 days the US Secretary of State, in consultation with the US UN Ambassador, shall conduct a review of all international intergovernmental organizations of which the United States is a member and provides any type of funding or other support, and all conventions and treaties to which the United States is a party, to determine which organizations, conventions, and treaties are contrary to the interests of the United States, and whether such organizations, conventions, or treaties can be reformed.
Upon the conclusion of that review, the US Secretary of State shall report the findings to the President Trump, and provide recommendations as to whether the USA should withdraw from any such organizations, conventions, or treaties.
In the same order, Trump withdrew the USA from UN Human Rights Council (UNHRC) and said it will not fund UNHRC and UN Relief and Works Agency (UNRWA). It will also evaluate its membership of UN Educational, Scientific, and Cultural Organization (UNESCO) within 90 days of the order.
After India, the biggest developmental partner for Bhutan in the 13th Plan is the UN, and its various bodies, which under the United Nations Sustainable Development Cooperation Framework (UNSDCF) will implement the UN development activities in Bhutan in support of the 2030 Agenda for Sustainable Development. UN has committed USD 150 mn or Nu 13 bn to Bhutan for the 13th Plan.
The vulnerability, here, is that the USA is the single largest contributor to the UN, contributing around 22% of its total core budget, 26.15% of its peacekeeping costs and billions more to other UN agencies. In 2013, for example, the USA gave a total of USD 13 bn overall to the UN which was more than 25% of the total UN spending overall.
Trump finds the UN biased and ineffective, and he feels the USA is paying too much, like in the case of WHO. So, with the US uncertainty over membership to the UN bodies and noises over funding, any cutdown or withdrawal, could have a major impact on Bhutan, like in the case of the WHO.
Trump’s executive orders, be it on the domestic or foreign front, has closely followed the policy prescription of ‘Project 2025,’ a conservative policy blueprint developed by the Heritage Foundation and other right-leaning organizations to guide a Republican administration in 2025. Around 12 people associated with ‘Project 2025,’ hold high level posts under the Trump administration not counting the Vice President J.D Vance who wrote the foreword to it.
When it comes to the UN, Project 2025 advocates for the US to cut funding to the UN. It supports shifting resources to domestic priorities and bilateral partnerships with allies rather than global institutions. Project 2025 had also advocated that US withdraw from WHO. President Trump’s main supporter, Elon Musk, even advocated for the US to completely withdraw from the UN.
GCF has allocated USD 19.72 mn or Nu 1.714 bn to Bhutan as grants for the 13th Plan. The GCF is a global financing mechanism established under the United Nations Framework Convention on Climate Change (UNFCCC) in 2010. It helps developing countries mitigate and adapt to climate change by funding projects related to renewable energy, climate resilience, and low-carbon development.USA is again one of the largest contributors, but the US withdrew from the Paris Climate Agreement and in February 2025 held back USD 4 bn in funds to the GCF.
When it comes to international financial institutions, the ADB has committed USD 27.19 mn or Nu 2.364 bn in grants and USD 156.485 mn or Nu 13.607 bn in soft or low interest loans for the 13th Plan. USA is a top donor of the ADB funding infrastructure and economic projects in Asia.
Similarly, the WB has committed USD 25.36 mn or Nu 2.205 bn as grants and USD 263.52 mn or Nu 22.915 bn as soft loans to Bhutan. The US is a founding member and the largest shareholder in the WB, providing significant funding to development projects.
Trump’s order is also evaluating the US contribution and role in both agencies. Project 2025 also supports reducing the US financial commitments to bodies, like the WB and IMF, and shifting focus toward domestic economic priorities.
The International Institute for Environment and Development has committed USD 7.860 mn or Nu 683.50 mn, but here again, the USA is a supporter of the organization.
The International Fund for Agricultural Development (IFAD) is a specialized agency of the UN dedicated to eradicating poverty and hunger in developing countries. It has committed US 7.275 mn or Nu 632.63 mn to Bhutan, however, apart from being a UN agency, its single biggest donor is the USA.
Even when one looks at non-US linked sources, like the EU, there is some indirect impact here too. EU has always been one of the major developmental partners of Bhutan, and while it does not follow the five year plan systems of Bhutan, it has a 7 year funding cycle. It has committed Euro 48 mn or Nu 4.545 bn in grants from 2021-27.
The European Investment Bank (EIB) gave Bhutan Euro 150 mn in loan for renewable projects.
Bhutan’s hope is that the EU will commit more grants for the next cycle starting from 2027 and EIB will also give more loans.
However, both are at risk, as the US change in policies towards Ukraine and Europe and the US demanding that EU countries contribute more in defense expenses has led to the EU announcing a Euro 800 bn rearming plan that will inevitably impact foreign aid.
UK has already declared it will cut foreign aid to meet increased defense expenses. For some EU countries, they will be looking at borrowing from European financial institutions to arm up.
However, even before Trump came on the scene, the global aid scene was shrinking with other heavyweight donors like Germany, UK, France, etc., all pulling back due to domestic economic and political pressures. The rise of right wing parties and even governments, like in Netherlands, means a steep cut in international aid as right wing parties and governments are inward looking.
Another major donor to Bhutan is Japan, mainly routed through the Japan International Cooperation Agency (JICA). In the 13th Plan, Japan has committed USD 32.62 mn or Nu 2.836 bn to Bhutan. While Japan has been relatively stable and unscathed unlike Europe, Trump, in the past, has also asked that Japan up its defense budget and pay for hosting US military bases there.
There is also a natural pressure on Japan to arm itself as tensions with China rise over disputed islands and the South China sea. There is also no saying what impact Trump’s global tariffs will have on the Japanese economy, and the same applies for the European economies.
The Global Fund to Fight AIDS, Tuberculosis and Malaria (GFATM) has committed USD 3.529 mn or Nu 306.88 mn to Bhutan, but here again, the biggest funder of GFATM is the USA which as explained above is no longer keen in giving to multilateral funds or giving at all.
Even though the USA and other western countries are the biggest contributors to multilateral agencies, like the UN, WB, ADB, etc., the advantage of these organizations for a small and vulnerable country, like Bhutan, is that it can take the assistance, like all other member countries with no political strings attached, except for the stated priority goals of the agencies which are mainly developmental or technical in nature.
Bhutan does not even have diplomatic ties with the global top donors like the USA, the UK and France, and Bhutan only established diplomatic ties with Germany in 2020 and with Japan since 1986.
A senior government official said that they are confident that what was committed by donors in the 13th Plan will come, especially since Bhutan does not require as much resources like others, but he said if things don’t go well in the international scenario, then future assistance for the 14th Plan could be impacted.
Given what is at stake, Bhutan cannot afford to be a mute spectator to fast moving international developments, and the country and government must prepare and come up with plans to deal with various scenarios as the entire international order is getting a major shakeup.
The hit to Bhutan may not come via just traditional developmental partners but also in other ways.
The USA is also a member and main funder of several other international organizations useful to Bhutan. These are the International Labor Organization (ILO), INTERPOL, OECD, IMF, Food and Agriculture Organization (FAO), International Civil Aviation Organization (ICAO), World Meteorological Organization (WMO), International Telecommunication Union (ITU), International Red Cross and others where Bhutan may not get grants or loans, but can get technical and other expert assistance.
