RMA Governor assures all is well again

The royal monetary authority (RMA) governor assured that the domestic financial system is safe, sound and resilient and in a comfortable position to meet their obligations despite the liquidity crisis in the country.

This assurance comes at a time when the country is faced with the Indian Rupee (INR) shortfall followed by the credit crisis. Many private companies are still facing the wrath of the crisis while private commercial banks have tightened up credit facilities since March last year.

The governor in a press release acknowledged that external imbalances have persisted; reflecting the underlying structural imbalances in the country and at the same time expressed that it came as a reminder to set things right. “The recent external imbalances with India have rightly been a cause of great concern to the nation. However, it has also provided valuable opportunity to assess our underlying vulnerabilities and to launch various measures and institutional policy actions needed to address these issues,” it stated.

He said growth continues to be supported by strong performance in the tertiary and secondary sectors, particularly construction, hotel and restaurants, and transport. The central bank expects the growth rate to fall further in 2013 to 6 percent before rising to an average of 11 percent in the following five years.

He reiterated on the central bank’s annual report that “our banks are safe, well capitalized and regulated under vigorous prudential norms. While the banking sector faced liquidity constraints in the recent past, there has been significant improvements over the course of time and the statutory liquidity ratio (SLR) stood at 33% for the year ending December 2012, well above the minimum regulatory SLR requirement of 20%. We would like to allay any concerns regarding our banking system and inform the general public that the asset quality and capital size of our banks has improved significantly and that the banking system is sound and remain well monitored by the RMA.”

Although the economy will continue to reel under challenges owing to huge imports and external aid, the governor also said the central bank will be introducing reform packages towards the third quarter of 2013 to address the challenges together with fiscal and other relevant authorities.

“In the meantime, we will have to continue to rely on short-term borrowings. The Government and the RMA have made arrangements with the Government and Reserve Bank of India for cheaper credit through the credit line and the currency swap amounting to close to Rs.10 billion. These arrangements, in addition to being cheaper, will tide us through to the middle of the year until our hydropower inflows pick up,” the press release stated.

Bhutan’s total external debt was recorded at USD 1.4B (Nu 77B), of which 84 percent is on hydropower, and the remaining 15.4 percent on Rupee loans taken from Indian commercial banks, including the State Bank of India, Punjab National Bank and the government of India line of credit.

With the gross domestic product at Nu 49B this year, Bhutan’s debt to GDP is at a high of 90 percent of gross domestic product.

The governor also stated that among the numerous measures taken recently, streamlining the use and management of the Indian Rupees was a much needed discipline and reform that helped to make trade payments more transparent, while improving disclosure and tax revenue. Additionally, addressing the under-invoicing of import payments which distorted the balance of payments statistics has been another great value that the reform has brought.

“Furthermore, the interplay of the policy and base rates will now make the interest rates more responsive to macroeconomic conditions and strengthen monetary policy transmission. We would like to reassure the general public that necessary steps are being taken to address the challenges,” it concluded.

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4 comments

  1. Bull-shit !!!!!!!!!!!!!!!!!!!

  2. Glorified Clerk

    Oh my God! our GDP is only Nu 49 B and the debt is 77 B. For a layman this is a very alarming situation. We are in deeply indebted country. How and when are we going to pay back all these debts?

  3. That is why, be Bhutanese, buy bhutanese, eat bhutanese, wear bhutanese, live bhutanese, walk bhutanese, sleep bhutanese bbbbbbbbbbbbbbbbbbbbbbbbbbb

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