The Royal Monetary Authority’s (RMA) announcement that rupee restrictions will be lifted from next year will be welcome news.
It is one more sign that the fundamentals of Bhutan’s economy are recovering after the late 2011 to 2013 battering that the economy received, in the form of the rupee crisis and the credit crunch.
On the credit front, banks for around two years have again started giving loans to the various sectors including the construction sector which was in a dire shape.
With the implementation of various developmental activities contractors are also getting more jobs and have not only been able to stave off bankruptcy but are prospering.
The early removal of restrictions on vehicle, furniture and alcohol imports has brought about a sense of normalcy in the consumer market.
As a result of all of the above and more Bhutan’s growth rate, which hit an all time low of 2 percent in 2013, recovered to 5.5 percent in 2014 and is projected to be 7.9 percent in 2015 and even more in the coming years.
The RMA itself is on sound footing with around INR 20 bn and another USD 833 mn in its reserves.
On the fiscal side the introduction of unpopular taxes in the first year of the government’s term, restriction on spending like not building government offices and other measures have ensured that imports and government spending has not gone out of control.
With the rupee crisis experience there seems to be more judiciousness in the spending of government resources.
There have also been more positive developments with schemes like the Employment guarantee scheme which has not only provided employment but also a boost for the private sector by shouldering some of the burden.
However, even though we have made progress, the government and other stakeholders will have to be very careful in ensuring that we don’t slip back into the tough times.
In that sense it is good that while lifting the rupee limit the RMA will be taking signed undertakings from people and identifying them to ensure that rupee is not misused.
With the fundamentals secure the government will have to take strong steps to ensure that in the next less than three years, doing business in Bhutan becomes easier with less red tape and a more growth and investor friendly environment. It should also lay the groundwork to ensure that once the hydropower projects come on line from 2017 onwards we can use it to further enhance economic growth.
The fruits of economic development must also be more evenly spread out among various sections and there should be an emphasis on small and medium businesses.
The government should also take great care to ensure the good quality of its infrastructure investments like roads, water etc.
Ultimately while things have improved the government of the day should achieve more to live up to the expectations of its electorate.
“In a good economy, people work hard to succeed. In a bad economy, people work hard to not fail.”