ESP and policy issues

The Economic Stimulus Program (ESP) could have become the most popular initiative of the government ,but it is rapidly heading to be its most controversial one with more unhappy people than those happy with it.

The ACC will let us know in due time if there is corruption involved in the program as alleged by some, and so we will leave that for a later day when the ACC comes out with its investigation findings.

The issue to discuss here is the policy and structural flaws in the ESP that is also generating so much unhappiness, anger and suspicion.

The Nu 15 bn amount was initially conceived to be a quick acting and massive injection of funds to revive a post pandemic economy down in the dumps.

However, the first big mistake was to allocate only Nu 3.3 billion (bn) as Concessional Credit at 4% interest and another Nu 2 bn as the business Reinvigoration Fund (RGF) which is interest subsidy of 4% for businesses affected by the pandemic which can recover with this subsidy.

There was very high demand for the Nu 3.3 bn Concessional Credit with Nu 11 bn in applications for Nu 3.3 bn available.

The Nu 3.3 bn was later hiked to Nu 3.5 bn due to more demand.

This was despite only agriculture, production and manufacturing being eligible leaving out other sectors like trading, tourism etc with even the agriculture component being limited by excluding cash crops and farmers groups.

Leaving out a sector like tourism was inherently unfair as the tourism situation was a creation of government policy by first encouraging mass construction of hotels from 2010 onwards with incentives and tax breaks, and then putting a break with a major change in the tourism policy after the pandemic.

Many small business people were deeply unhappy that their sector got left out or that their loans were rejected.

The vast majority of the Nu 15 bn at Nu 9.7 bn were to be spent by various government agencies over a longer period.

The Economic and Finance Committee of the National Assembly in a report in July 2025 found the utilization of funds by these government agencies not being up to the expected level, utilizing only Nu.1.107 bn from the total allocation of Nu. 9.7 bn; which estimates to 11.4 percent of the total allocated fund.

Here it was clear that the funds were not being spent in the area with maximum demand which is concessional credit, but instead in government programs and political pledges where there was no natural demand and would also function at the whims and fancies of bureaucrats.

It was bad enough that of the Nu 15 bn only 3.5 bn was kept for concessional credit. However, matters were made worse when the government imposed strict conditions on banks saying that if any of the loans became Non Performing Loans (NPL) then the banks would have to pay back the full amount.

Banks became ultra cautious and thus started giving loans only to businesses with strong cash flows which naturally benefited established businesses over those with great ideas but just starting out or starting from scratch.

This ended up essentially converting the ESP into any other conventional loan product that favours those with stronger balance sheets.

An example was during the EFC Committee hearing when Mr. Sangay Dorji from Wangduephodrang, who started a mushroom business at home and had support from the Dzongkhag and evaluators who visited his business saw his loan rejected.

On the other hand Mr. Chencho Norbu, founder of Norgu Lights, a business that manufactures LED lights, floodlights, and other types of bulbs got his loan approved as he was earning Nu 2 million a month before the loan, and he provided his bank statements as assurance, of his repayment capacity.

The combination of limited funds for the Concessional Credit and tough conditions on banks ensured less people got loans, and those who got them probably were the more established or the more well off as banks played safe.

A major problem with the ESP here seems to be the perennial government distrust of the private sector and an approach that government knows best.

The result is a private sector starved of much needed funds on one hand, and on the other hand government agencies and departments struggling to spend the huge funds given to them under ESP.

Another aspect of the problem is that the current government over promised during the elections and so a chunk of the ESP is heading into fulfilling pledges like education loan and housing loan. These unfortunately will not give the immediate economic boost that is required.

What also did not help was that we asked India for 100 bn for the 13th plan and 15 bn as a separate ESP fund with a total request of Nu 115 bn.

India gave us 85 bn for the 13th plan and 15 bn for the ESP which meant the 13th plan was short by 15 bn. This forced some of the ESP to be used for economic activities that the plan should have covered.

In short the Nu 15 bn ESP has fallen far short of its initial promise to boost the economy and is neither here nor there with more upset people than happy people. It could have been so much more.

“Thrift is poetic because it is creative; waste is unpoetic because it is waste.”
 G.K. Chesterton