The Bhutanese Leading the way.
The National Assembly’s (NA) Economic and Finance Committee (EFC) has come up with its Report on the Implementation of the Economic Stimulus Program (ESP) of Nu 15 bn.
With a total funding envelope of Nu. 15 billion (bn), the ESP aimed to revive the economy through a mix of concessional loans, business reinvigoration support, and targeted agency-led initiatives. For concessional loan Nu. 3.3 bn, and for business reinvigoration fund Nu. 2 bn is allocated; and the remaining Nu 9.7 bn is allocated under relevant government agencies for implementation of specific initiatives that has potentials for economic revival.
On the concessional loan, as of 3rd May, 2025; Nu. 1661.26 million (mn) is approved but only Nu. 745.95 mn is disbursed which translates to 22.6 percent of the total allotted fund. As for Reinvigoration Fund (RGF) Nu. 667.32 mn is approved from the total allocated amount of Nu. 2000 mn.
Similarly, the utilization of funds by agencies for implementation of specific initiatives for revival of the economy is not up to the expected level, utilizing only Nu.1107.55 mn from the total allocation of Nu. 9,700 million; which estimates to 11.4 percent of the total allocated fund.
High demand for Concessional Credit
Despite strong demand for concessional credit, particularly to support recovery efforts in the aftermath of the COVID-19 pandemic, actual disbursement remains significantly low. The total demand for the loan was Nu. 11507 mn; of which only Nu. 1,661.3 mn approved for disbursement. Against the approved amount, only Nu. 745.95 mn, estimated to 6.48 percent of the total demand, is dispersed. These figures highlight serious inefficiencies in fund utilization and raise concerns regarding bottlenecks in the disbursement process, which undermine the effectiveness of the Economic Stimulus Plan in achieving its intended goal.
Underutilization and misalignment of funds.
The ESP is a special fund to be used for special programs to revive the economy. Its use must be fast tracked with a focused approach. As of date, fund utilization is far below par; besides, ESP fund is used to augment the shortage of budget for regular 13th FYP activities and for long-term investment on education and housing loans. If the trend continues with the same pace and approach, there is a high risk of failing to attain the goal of economic revival within the given timeline.
Exclusion of support for proven cash crops, farmer groups and cooperatives
Despite their potential for export and significance to rural incomes, proven cash crops like potatoes, ginger, cardamom, apples, and oranges are not generally not covered by the concessional loan program. Where support is rendered, it is sporadic. The youth groups, women-led enterprises, and farmer cooperatives, likewise are also still not eligible under the scheme. This lack of support hinders the program’s potential to nurture and revive the economy.
Exclusion of financial support for trading and hospitality Sectors
Despite tourism being among the hardest-hit sectors during COVID-19, support for tourism has been limited to training and promotional activities, with no financial relief for tour operators and the hoteliers. Similarly, trading sectors are not covered under current eligibility, limiting the ESP’s reach and impact.
Exclusion of support for entities with Non-Performing Loan (NPL)
Under the current framework, applicants with NPL and poor CIB records, and those under cooling periods are disqualified for obtaining the services. This contradicts the ESP’s mandate of supporting distressed businesses, many of which are recovering from pandemic-induced defaults. According to the Royal Monetary Authority (RMA), as shown in table NPL amount to Nu. 7.582 bn across 6,696 accounts. Charged-off loans stand at Nu. 13.477 bn (4,228 accounts), and loans under deferment amount to Nu. 29.62 bn (4,828 accounts) as of 30th April 2025. These figures highlight the need for a more flexible and rehabilitative approach to ensure the ESP reaches its intended beneficiaries.
Heavy risks of ESP Loans for PFIs
The entire risks of ESP loans are passed down to the Participating Financial Institutions (PFIs) but with relatively lesser return as compared to the normal loan portfolios. Therefore, PFIs are compelled to apply stringent criteria to avert the risks, consequently hindering the coverage of Economic Stimulus Program’s loans to wider sections of the society.
Unfair System of support for concessional loan and agency initiatives
The support for concessional loan is catered at the subsidized interest of 4% under Window I with the redemption period extending from 2029 to 2034; Whereas, the initiatives for economic revival under ministries and agencies, are given as a grant without any plan to sustain the initiatives post project period. Hence, the benefits of the initiative may dissipate without any significant impact post implementation.
Lack of plan for Monitoring and Evaluation
The Monitoring and Evaluation (M&E) are crucial across all stages of implementation for the success of the program. Under the existing guideline, monitoring and evaluation is planned to be carried out by staff of PFI; but noting the inadequacy of staff even to carry out their regular functions, there is a risk of eventual failure of the program. The engagement of LG leaders and technical people especially at the planning, monitoring and evaluation stage are minimal under the current implementation arrangement.
Steady performance of the price guarantee scheme
Overall, the price guarantee scheme has aggregated 1004.62 MT of various crops: paddy, wheat, maize and quinoa and disbursed Nu. 45.7 mn. Similarly, 247 MT of livestock product was aggregated revealing the steady performance of the scheme. However, the scheme lacks plan to sustain the program after termination of ESP.
Short gestation period
There is no clear guideline on the appropriate gestation period before the commencement of Equated Monthly Instalments (EMI) for loans sanctioned under the ESP. Currently, banks begin collecting EMI as soon as the sanctioned amount is disbursed, with minimal consideration for the actual establishment and income generation of the project. For sectors like mushroom farming, shiitake mushroom farming, and poultry farming, banks start collecting EMI after 4–5 months, while for piggery farming, a 1-year gestation period is allotted. However, for many projects, even 4–5 months may be insufficient to establish the business and start generating returns, leading to undue financial pressure on borrowers.
Committee’s Recommendations
Considering the gap of Nu. 8.2 billion between demand and current allocation of funds under concessional loan, and ineffective and underutilization of funds by agencies; it is strongly recommended to reallocate the fund to concessional loan. By reallocating the fund, efficiency of fund usage and the potential for economic revival with more beneficiaries could be significantly larger.
The goal of the ESP and actual delivery on the ground could not converge as envisaged. One of the primary objectives of ESP is to support distressed business, however, both the regulation and Royal Monetary Authority and Standard Operating Procedures (SOP) of Participating Financial Institutions (PFIs) did not favor entities with Non-Performing Loan (NPL) and poor Credit Information Bureau (CIB) records in gaining access to loans both under concessional scheme and Reinvigoration Fund (RGF). The business entities such as: traders, tour operators, hoteliers and manufacturing units are the ones that were highly impacted by COVID. To give a fair chance to distressed businesses recover, the committee recommends relaxing of NPL and CIB criteria and doing away with the cooling period to gain access to loans.
The competing demand of concessional and RGF loan, limited allocation of funds and vulnerability of PFIs to coercion; there are potential risks of misuse of funds. To mitigate the risks, timely monitoring and evaluation of programs by relevant agencies: PFIs, technical sectors and Royal Audit Authority is crucial. Therefore, to ensure effective use of funds for the intended purpose, periodic monitoring and auditing is recommended.
NPL is one of the critical factors that impedes access to loans. The NPL which stands at Nu. 7.58 billion, excluding charge off, is also a looming threat for the economy in near future. The deferment scheme pursued by RMA and the government appears helpful as a short-term relief measure, but in essence, it is just a postponement of looming risks which would eventually lead to irreparable economic consequences. Since the majority of NPL problems have emerged due to unforeseen calamities, it calls for the government’s interventions with priority. The committee, therefore, strongly recommends the government to strategize sustainable measures in addressing NPL in collaboration with RMA and PFIs.
To address inefficiencies in fund utilization and to tackle delays in the disbursement process, the committee recommends harmonizing the regulations and SOPs of PFIs; and decentralizing slab-based approval and disbursement authorities with accountability to the branch managers. If at all decentralization of authorities cannot be implemented due to inherent risks, recruitment of additional staff to expedite the services could be explored.
Considering the steady performance and significant benefit in motivating farmers to enhance production, the committee recommend reallocating additional budget to expand the ESP Price Guarantee Scheme for crops and livestock and to develop long term strategies to sustain the program after the termination of economic stimulus program.
The committee proposes of providing a minimum gestation period of at least 6 months after the execution and establishment of the project before initiating EMI collection. For projects with longer gestation periods, such as piggery, the repayment should be aligned with the actual realization of income, allowing up to 1–2 years as needed. Additionally, if the current loan term is too short to accommodate an adequate grace period, the loan tenure should be adjusted to support the viability and success of the funded projects.
