Late on Thursday night the Facebook page of the Finance Minister Namgay Tshering released a notification placing a moratorium on the import of vehicles to preserve the depleting foreign currency reserves of Bhutan.
The release quoted Article 14, Section 7 of the Constitution of the Kingdom of Bhutan which states that ‘A minimum foreign currency reserve that is adequate to meet the cost of the not less than one year’s essential import must be maintained “.
It said to uphold the Constitutional provision and most importantly to address the macroeconomic imbalances that the entire world is going through and as an initiative towards protecting our foreign currency reserve, the import of vehicles will be suspended with immediate effect until further notice.
It said all vehicles including two-wheelers except utility vehicles, heavy earthmoving machines, and agriculture machineries will not be allowed for imported.
For the purpose of clarity, the utility vehicle costing less than Nu 1.5 million equivalent to USD 20,000 (whichever is less) shall be allowed.
Vehicles for the use and promotion of tourism shall be exempted from this moratorium. The terms and conditions, and type and number of the vehicles to avail the exemption from this moratorium, shall be submitted by the Tourism Council of Bhutan.
Taxis, both fossil and electric which are due for replacement shall be exempted from this moratorium.
It sais the moratorium shall be reviewed and amended (where necessary) in 6 months from the date of issue of this notification depending on the foreign currency reserve position.
The moratorium is implemented to ensure adequate foreign currency reserves for maintaining macroeconomic stability.
“In this national endeavor, the Government calls upon every individual to collectively support the measures to strengthen our economy,” said the release.
This notification came into effect from 19 August 2022, and vehicle bookings received after 18 August 2022 shall not be permitted.
The last time such an import restriction was put in place was in 2012 during the Rupee Crisis when the reserves similar underwent a decline due to excessive imports over exports.
The Finance Minister earlier told this paper that the reserves are at USD 845 mn which is the lowest since July 2013 when Bhutan was just emerging from the Rupee Crisis.
The Minister for Economic Affairs Loknath Sharma had earlier told this paper that the import restrictions will be for non-food imports which are not essentials.
He said there will be three phases depending on the situation and the vehicle import restriction appears to be the first phase.
If the reserves do not improve or decline further, then there will be more stringent import restrictions on non-food items in phase two and three.