The Bhutanese Leading the way.
The country’s inflation rate rose to 6.07 percent in March 2026, driven largely by sharp increases in fuel prices, according to the Ministry of Finance (MoF).
The increase marks one of the highest inflation levels recorded in recent months, with food inflation reaching 7.07 percent and non-food inflation at 6.51 percent.
Speaking during the 27th Meet-the-Press session yesterday, Lyonpo Lekey Dorji, MoF said that the rise in inflation must be viewed in the broader context of global inflationary pressures linked to ongoing conflicts in West Asia and the economic adjustments following the implementation of the Goods and Services Tax (GST).
The MoF clarified that inflationary pressures from the introduction of GST were mainly experienced in January and, to some extent, February 2026. Officials said the government had anticipated a temporary inflationary impact of around two percentage points during the transition period and had informed the public accordingly.
To cushion the impact on households, the government simultaneously revised the Income Tax Act and reduced income tax rates. According to the ministry, although gross salaries remained unchanged from January 2026, most taxpayers experienced an increase in their net disposable income averaging around five percent for those in the P1 salary grade and similar pay packages.
Lyonpo Lekey Dorji said prices of fast-moving consumer goods (FMCG) began stabilizing in March after older stocks were cleared from the market, suggesting that the initial GST-related price increases were temporary rather than a sustained driver of inflation.
However, the ministry stated that the main driver of inflation in March was the sharp rise in fuel prices.
On a weighted average basis, fuel prices increased by about 49 percent compared to prices before 16th March 2026. Petrol prices rose by around 35 percent while diesel prices increased by about 55 percent.
The MoF noted that although current fuel prices, Nu 85 per litre for petrol and Nu 108 per litre for diesel, remain lower than the record highs seen in 2022, the pace and scale of the latest increase created a major economic shock.
In response, the government introduced the National Fuel Price Smoothening Framework (NFPSF) to moderate the impact of the price hike.
The intervention reduced the overall fuel price shock from around 49 percent to approximately 32 percent. Diesel price shocks were specifically reduced from 55 percent to 31 percent due to diesel’s wider impact on transportation, production and overall market prices.
The ministry stated that without the NFPSF intervention, inflation in March 2026 could have risen to an estimated 9 to 10 percent.
Lyonpo Lekey Dorji said that the measures reflect the government’s efforts to contain inflationary pressures while balancing economic reforms with the need to protect household welfare and purchasing power.
