The Bhutanese Leading the way.
Facing an unprecedented economic crisis in the making due to the impact of the Corona virus on Tourism, Transport, Trade and other sectors the government, led by the Ministry of Finance, is coming up with a Contingency Plan or an Economic Stimulus Plan.
The Finance Minister Lyonpo Namgay Tshering said that one major move that the government is considering is delaying the payment of 2019 Business Tax for the affected sectors like in Tourism.
He said that most hotels are already under Fiscal Incentives and more cannot be given and so delay in tax payment is one approach that can be done under the Public Finance Act.
The minister said that another area that is being looked at is frontloading certain activities of the 12th plan to stabilize the economy by creating economic activity and generating jobs.
He said this would also ensure cash flow in the economy. The minister said these activities are ones that can be done immediately without much delay and these included improving farm roads and making them all weather roads, taking up the water flagship project where a lot of ground work has been done and accelerating certain activities.
He said that the plan is to ensure that even if tourism is hit for three to six months there are enough activities in other areas to offsets the losses.
The Finance Minister, on Friday, met with the various stakeholders of the Tourism Industry like the Hotel and Restaurants Association of Bhutan (HRAB), Association of Bhutanese Tour Operators (ABTO), Guides Association of Bhutan (GAB), Handicrafts Association of Bhutan (HAB) and BCCI.
Tourism stakeholders said that in the meeting various proposals were put to the Finance Minister but one key proposal was on loan deferment and the Finance Minister indicated that this is being look at by the Royal Monetary Authority and the FIs.
The HRAB Chairman Sonam Wangchuk said that he heard from some credit officers that banks are looking into the issue of loan interest deferral or reduction for affected sectors like hotels.
However, on the other hand the RMA and the banks are also being very conservative and tight lipped about raising expectations as they do not want this to be a free for all and they want to see how the situation evolves on the ground. However, the RMA and FIs are expected to provide some relief to the worst hit sectors though it would be on a case by case basis.
The Finance Minister declined to go into what RMA’s recommendations were but he said that with Tourism being badly hit, one concern is on the increase in the number of loan defaulters.
He said that the RMA and FIs must ensure cash flow and liquidity so that small businesses are not impacted badly and consumption is boosted.
The Finance Minister said that the RMA and FIs would not take a blanket approach as not everyone is in the same position.
The Minister said that the government will diagnose the risk to the economy and come up with short term, medium term and long-term plans. He said resource mapping would be done and losses would be determined per sector and a matching amount of funds would have to be pumped into the economy.
Apart from helping the domestic sectors in trouble the government is also wary of external shocks that will hit the Bhutanese economy.
One particular concern is inflation.
The Finance Minister said that unlike in the 2008 global economic crisis the difference now is that the global supply chain is being disrupted with China and other countries being hit. The minister said he is certain that there will be inflation due to a disrupted supply chain as Bhutan’s economy is largely import driven. He said that measures will have to be put in place for this.
The minister said that agencies like the MoAF and FCB would maintain food supplies and reserves. He said that India’s assurance to Bhutan that no matter what happens in India the supply of food, medicines and fuel will continue is very important.
The minister also said that unlike past crises when the problem was supply driven the crisis this time is more of demand and as people practice social distancing, this will impact demand and so even this needs to be accounted.
He said that the contingency plan would also have to look at the measures to put in place if India goes under a lockdown.
In the larger context, with Corona hitting stock markets and leading to lowered global GDP forecasts not seen since the 2008 financial crisis there is a good chance for a global recession and that like in 2008-09 will impact Bhutan in the longer term. This is also something that the contingency plan has to look at.
