On loan worries

The Cabinet in a 5 June 2023 letter to the RMA put forth a wish list of 8 points all to do with the monetary sector.

As a result of that letter the RMA suspended the commercial housing and hotel loans and increased the incentive for remittance from 2 to 10 percent.

The one big demand that RMA has not yet agreed to is the Cabinet’s request to extend the loan deferral by three more years.

It is clear that with the elections a few months away and the economy still not doing well the cabinet wants to throw even the kitchen sink at the problem.

The cabinet should know that economic issues cannot be fixed by monetary steps alone as the government also has to take its own steps.

Putting excessive burden on the banks by asking for another three years’ deferral is not a reasonable demand.

If the cabinet is really so worried, then it should take corrective policy steps to ensure that things start to pick up.

The worst hit sector is tourism and by extension hotels which have huge loans on them. The cabinet must figure out ways to increase the numbers of tourists dramatically for the upcoming autumn season and the spring season next year.

The government has already agreed to give an effective 50 percent waiver with the 8 days and 14 days stay where only half the SDF will have to be paid.

This is very complicated for many tourists and tour operators. It will be much simpler to make it USD 100 per night as an interim measure.

Another practical step that can be carried out is to reduce the airfare for tourists and especially Indian tourists. If this is done then large numbers of SDF paying affluent Indian tourists will fly in from major metro cities like Delhi, Mumbai, Bangalore, Kolkata etc. This will help fill up the rooms.

The Finance Minister said in Parliament that the SDF collection is going well despite the low numbers, but the point of tourism is not just to collect SDF but to also ensure that they contribute to the local economy like hotels, taxis etc.

Bhutan can never go back to the days of mass and cheap tourism where packages to Bhutan were sold at Nu 900 a day and we had hotels mushrooming everywhere.

However, at the same time the government must work creatively to ensure that we get the right numbers and quality so that high value and low volume is achieved.

“In meetings philosophy might work, on the field practicality works.”
 Amit Kalantri