Response to a Response

There was a RMA reaction today in a newspaper to an article by Dasho Karma Ura titled, “THE RUPEE CRISIS MACROECONOMIC CAUSES AND CURES.” It seems RMA officials have not read the article carefully. In what was published so far, which is Part 1 out of presumably more parts, not all arguments have been fully exposed to give a fair rebuttal.

(1) Contrary to the RMA’s counter reaction, the article did not say that M2 or money supply is growing. Indeed it specifically mentioned that it has been stable over the last three years. Yet the domestic credit is growing and that needs attention. This statement is supported by the data in the article.

(2) The article did not say that hydropower investment directly or instantly leads to M2 growth. It does lead to deposit growth whether RMA sweeps it or not. That is so by definition. However, it remains true that the hydro investment during construction phase creates income, and income increase will lead to increased demand, and that will boost imports, as MPI of 63 paisa indicates.

(3) Establishing BOB subsidiary in India is entirely a different issue. Laws have to be amended, no doubt. Once established, it will not be operating as though it is an extension of BOB here regulated by RMA. It will be regulated by Indian laws. Only profit will be repatriated here. So it is far more complex than RMA says. My view is that it will be really positive move if we can take it forward not only for this reason but for several others that I cannot mention here. For example, it may lead to some degree of capital movement and it may be a testing ground and experience building in that direction.




Response to “Nu 5 Bn Economic Stimulus Plan Submitted By Task Force Discussed In Plan Talks”

Hopefully Banks will lend more responsibly and loan officers won’t take bribes from the borrowers and increase the value of their property to get bigger loans as was the case before. Also big defaulters should be blacklisted and not given additional loans. The Banks are at their mercy and have a tough time collecting money back. The defaulters tend to make agreements to try and weasel out of paying their original interest payments. If genuine projects get the loans it will be a value addition to the country’s GDP.


It is quite disturbing that after injecting Rs.14 billion by Central Bank with the hope of improving our economic situation it got drained off within 2 weeks. The present parliament should immediately institute a high level committee to study and find out an appropriate solution before it gets aggravated further.


This is indeed a serious issue and the financial institutes must ensure regionally balanced credit facilities. The economic hubs of Gelephu and Samdrup Jongkhar must be given equal footings with that of Phuntsholing which entails some special economic packages to the east and south instead of pumping everything in Thimphu and Phuntsholing.


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