At a time when Bhutan is facing a severe financial crunch and shortage of money supply the government has take a loan of US$ 36mn or Nu 1.8bn from the World Bank.
This part from bringing in much needed funds will also push up Bhutan’s existing external debt of Nu 76 bn. Already the debt to Gross Domestic Product (GDP) Ratio has crossed 100%.
The loan was approved by the World Bank on 2 October, 2012 to support the Royal Government of Bhutan’s (RGoB) ongoing medium-term policy and institutional reform program. The second loans of its kind called the Second Development Policy Credit is to bring about budgetary support for the RGoB’s Tenth Five-Year Plan in enhancing growth, achieving better socio-economic outcomes, and reducing poverty.
According to the World Bank Bhutan office there are three main objectives of the loan. Building on the objectives of the first operation, this Credit specifically aims to (i) promote public sector efficiency and effectiveness to improve the delivery of public services; (ii) foster private sector development by improving the policy environment and facilitating productive employment opportunities; and (iii) expand access to infrastructure in a sustainable manner.
“As the young democracy deepens institutional and policy reforms in pursuit of its development goals, the expected benefits of this Credit are substantial.” said Robert J. Saum, Country Director for Bhutan. “These resources are vital for ensuring sustainability and growth of the Bhutanese economy, and for supporting the general welfare of its people. He added”
While recognizing the importance of economic growth in alleviating poverty, Bhutan prioritizes sustainable development. Therefore, its development vision attempts to maximize Gross National Happiness – a vision that places as much weight on social, spiritual, intellectual, cultural and emotional needs of a society as it does on economic growth.
This US$ 36mn Credit is from the International Development Association (IDA) – the World Bank’s concessionary lending arm.
A second IDA-financed operation, Remote Rural Communities Development Project, for US$ 9mn was also approved on 2 October, 2012. This project aims to support increased agriculture productivity and access to community assets in remote rural areas by improving access to markets, irrigation, agricultural technologies and community infrastructure. This project will be implemented by the Ministry of Agriculture and Forests, Royal Government of Bhutan. It aims to support the country’s poorest and most remote rural areas as identified by sub-national poverty maps developed by the National Statistics Bureau, Royal Government of Bhutan with technical and financial assistance from the World Bank.
Earlier in an interview with The Bhutanese, Center of Bhutan Studies President Dasho Karma Ura commenting on this loan in the context of Bhutan’s larger debt burden said, “Taking a soft loan for consumption or general budgetary support should be treated with extreme caution.”