Loan deferral

There are two contradictory positions right now on the loan deferral which is coming to an end on 30 June 2024.

The Central Bank and the government has made it clear that there will be no more blanket deferrals like in the past and instead it will be left between the banks and clients.

The government says at the most some deferral may be given till December 2024 for certain high-risk sectors but nothing beyond that.

The government says continued deferrals will weaken the banking system and impact credit availability.

On the other hand, the private sector and especially the hotel industry are asking for deferral of 2 to 3 years if not more. They say they are in no condition to pay loans given the economic situation.

On one hand the government and the Central Bank which has studied the situation extensively is right as we will be heading for trouble if we give any more blanket deferrals.

However, on the other hand the private sector is also right in pointing out the poor state of the economy and reduced revenue and customers.

Here the solution should be to help the private sector earn better revenue.

For example, the worst hit sector is hotels. Here, the government must come up with rapid policy measures to increase the numbers of tourists.

Starting with the border towns the SDF should be extended beyond the current 24 hours, which does nothing, and give more numbers of days free of SDF.

To help hotels in the center and east there should be duration discounts for SDF brought in so that tourists can travel there too and more tourist entry points from Samdrupjongkhar and Gelephu need to be opened up for tourists to be brought to the east.

In the west, more tourist visits should be encouraged through more incentives and removal of barriers.

MICE has a lot of potential to tap into an entirely different travel market and so that should be speed tracked to help hotels and restaurants.

In short, if the Central Bank and government cannot give deferrals then all policy tools should be used to help the private sector and quickly before something breaks.

A strong economy is the source of national strength.
Yoshihide Suga