The Bhutanese Leading the way.
On the second day of Tenth Session of the National Assembly, the finance minister Namgay Tshering said that, the current state of economics is not just due to the policy changes or the current government.
In contrast to many countries that gauge their foreign reserves based on net imports and exports, Bhutan primarily relies on revenue from tourism, hydropower, concessional grants, and borrowing.
“We have fundamental macroeconomic parameter issues and we need to fix these fundamental problems instead of fixing short-term issues. The fundamental problems are something we all should be all responsible,” he further added.
In alignment with our commitment to uphold the Constitutional mandates, especially Article 14, Section 7 of the Constitution of the Kingdom of Bhutan, which stipulates the necessity of maintaining a minimum foreign currency reserve sufficient to cover at least one year’s essential imports.
Lyonpo emphasized that Bhutan’s heavy reliance on imports, constituting 90 percent of its needs, requiring a monthly expenditure of USD 100 million or an annual total of USD 1.2 billion, significantly depletes its foreign reserves.
The import of petrol and diesel alone accounted for Nu 12.3 billion, nearly half of the revenue generated from electricity exports, which totaled Nu 22.48 billion. Vehicle imports amounted to Nu 3.5 billion, with other items like charcoal and raw materials for manufacturing also ranking among the top 10 imports.
The finance minister Namgay Tshering mentioned that for every dollar, we spent 60 percent on import. Currently, the nation’s foreign reserve stands at approximately USD 550 million, which is sufficient to cover essential imports for a period of 14.22 months, and it exceeds the minimum requirement of USD 464 million).
The foreign reserves were at Nu. 776.63 mn in December, 2022.
The Ministry of Finance also mentioned about the collaboration with the Royal Monetary Authority (RMA) of Bhutan, they have taken measure to stop the outflow of foreign reserves such as moratorium on vehicle imports and freeze on construction loans.
However, exemptions have been granted for utility vehicles, those for the tourism industry, and passenger vehicles.
The moratorium is till February 17, 2024.
Construction loans have been temporarily restricted until December 2023.
Acknowledging the significant importance of foreign currency remittances the government has raised the incentive for each convertible currency sent to Bhutan from 2% to 10%.
To fortify our Indian Rupee Reserve, the Royal Monetary Authority (RMA) entered into a Rupee SWAP arrangement worth Nu.5.4 billion in March 2023.
Additionally, the RMA secured an additional Standby Credit Facility (SCF) of INR 3 bn in January 2023 to primarily fulfill international foreign currency reserve requirements and balance payment obligations with the Government of India.
