Rupee and Credit Crisis continues to escalate

Architects, consultants, hardware dealers, contractors, sawmills, and many other sectors struggle as the situation exacerbates day by day

The incumbent government’s term ended with claims of having achieved economic growth and stability, but the fact remains that the Indian Rupee (INR) situation continues to have a major and escalating impact on businesses across the country.

Though the main sectors affected are the construction industry and real estate business, the crisis has also had a domino effect on business and workers, which includes architecture firms, consultancy business, masonry, painters, sawmills, hardware store owners, cement agents, steel, sand and stones agents.

Apart from a shortage of INR and budgetary cut backs non- availability of credit from commercial banks are among the major issues affecting businesses. Some major projects have been stalled while some have been delayed.

Ever since the INR issue surfaced last year, the central bank imposed new restrictions on banks on April 2012, leading to a virtual credit freeze on housing, vehicle and other loans. This continues to have a severe impact on the domestic economy with many businesses in the private sector, either closing shop or operating at a bare minimum capacity. There are still no signs of the credit restrictions being lifted with Rupee borrowings hovering around Nu 20 bn.

The president of the Bhutan Chamber of Commerce and Industry (BCCI), Ugen Tshechup Dorji said, “What I have always maintained is that one of the vital ingredients of a country’s development is the construction, infrastructure or the real estate sector. For the government or authorities to come with a policy to ban housing loans, there is huge adverse impact on many business enterprises or skilled workers.”

Automobile companies and heavy machinery dealers are running on huge losses. The industry is suffering a huge setback with not a single import made since March last year.


Hardware shops hit

Many of the hardware store owners in the capital say that they may have to close down businesses temporarily or for good if the situation doesn’t improve. “We have tried our best to sustain for over a year but now it has reached the limit,” a major store owner in Thimphu said.

The problem here is just not in Thimphu and Phuntsholing but other part of the country. Owner of Laxmi Metal Store in Sarpang, Gelephu said product sales have decreased at all small hardware stores. “People depend on loans to construct houses, so there is a strong effect on our business,” she said.

Monar Pradhan of GSP Enterprise in Dagana said, “Although ours is a village market here, there is an impact of about 30 to 35 percent to businesses.”

“Meetings after meetings with the government over almost a year have resulted in only wastage of time and no concrete solutions to the issue at hand,” a builder in the capital said. “What came out of it all was just a petty blame game,” he added.



Architecture, usually known to be among the lucrative professions hasn’t been spared.

A working architect said, he and his comrades took the risk of working independently after their graduation given the fact that the country is at a developing stage and that infrastructure business would boom. He is one of the many architects who said it has been months of struggling to survive in the business, due to the state of the economy.

Peter Schmid, an architect with Yudruk Consultancy who has been living and working in Bhutan for over two decades said, “It is bound to get worse in the future because almost nobody in Bhutan builds houses without availing loans and the restrictions on credit don’t look temporary.”

He said problem passes on from builders to raw material suppliers to hardware stores to many more in the line of construction business.

When asked about the status of the situation, the president of Bhutan Institute of Architects (BIA) Dorji Yangki said, “Some architects have reported that they now have no or very less projects as many government sector agencies do not have the funds for construction projects, while clients from private sector clients have almost dried up. A few architects have not even been paid by their private sector clients for works completed due to problems with loans.”

She said local architects in the private sector have had several discussions on the issue over the past year and hopes to hold a general meeting on the problem. “We will then consequently try to approach relevant authorities on this issue,” she said.

The BCCI president said, “For now, there is no point in putting up the issue to the interim government for they have no powers to pass policy decisions, but we intend to highlight the issues to our bureaucrats and make them understand the ground reality.”


The BIA president concerned about saving the companies that are closing down shop said the government and related corporations could start by, “Ensuring that the consultancy works are tendered first to local Bhutanese consultants and firms to give them a chance for employment before advertising the bids right away to international consultants and firms.” She also said most of the professional consultants in Bhutan, not only have local experience or knowledge, but have also studied in some of the best universities in the world and are therefore very capable.



One of the worst hit are the consultants, who have lost hope that the economic situation will improve and are resorting to new business ventures, but are still affected by the economic crisis.

A seasoned local consultant said his four-year-old firm is now completely defunct, and has resorted to venture into the manufacturing industry. However, he said the trade and industry office denied approving any licenses citing restrictions on import of raw materials. “Even if we import raw materials we could contribute in abating the INR crisis through import substitutions. But ultimately, the government rules for such businesses were very discouraging,” he said.

Namgey Retty of Yalama Arts & Consultancy said, “There has been no works at all ever since this INR and credit issue emerged. We can hardly meet our overhead expenses. I have been running on overdraft from the bank for a year hoping that I might get some work or project, but the possibilities look grim.”

He said only a few government projects were floated and that too was easily lost to unrealistically low bidders while private home builders hardly hire consultants to build homes.

This, he said, also compromises the quality of works whether it is a government project or a private one.

Namgay Retty also said they cannot hire human resources such as architects and engineers if there is no work. “Earlier, we were able to employ a lot of people. Now we had to downsize manpower and forget about profits, we can hardly keep the office running,” he added.

“We are in huge trouble. Overhead expenses such as house rents never go down and keep rising. So frankly speaking, we are not happy at all because of the credit situation,” he concluded. Many import based businesses are also severely affected due to import restrictions in place.


Townships and others affected

The credit crisis has also affected major government projects such as new townships, which are either delayed or have been cancelled. For instance, the construction of the Lhuentse main town area site development activities started since 2004, but most work was halted there after the loans were frozen.

Even sites for new megaprojects where landowners could have benefitted by building and leasing our flats to companies are suffering.

Contractors big and small say that the country is dotted with hundreds of incomplete building structures of private homes as works has been stalled due to lack of funds.

As a result, a host of other related businesses are affected. Sawmills have seen slumped orders due to low construction activity. There has also been a decrease in demand for aggregates and sand along with steel. Steel factories due to the reduced demand are mainly operating at reduced capacity or are short for long periods of time.

Jobs gone

Though the government has shown unemployment figures of 2.1%, however, Bhutan’s biggest employer which is the private and corporate sector has seen large numbers of people losing jobs at all levels. Zimdra has publicly laid off 35 people, and several other car dealers, constructions companies, architects, consultancies, factories and other small businesses have laid off their staff in huge numbers, even while depressing the wages in the private sector.  A large number of new graduates with good marks are unable to find decent jobs, with some of them working at the national minimum wage levels.


What the authorities say

The director general of the Construction Development Board (CDB) Phala Dorji said the situation may be abated with the onset of the 11th five year plan.

Records with the CDB show more than 60 architects, about 50 consultants and over 3800 contractors registered with the board.

Economic affairs Secretary Dasho Sonam Tshering said one should be prepared to face such situations in a commercial venture. “There will be times when you might make a lot of money because the economy is good and there will be times when you will suffer losses because of an economic downturn,” he said.

The Secretary also insisted that the affected businesses should try to explore alternatives or temporary measures to cope with the problem. “There are no immediate measures that the government can initiate but to hope that the economy will improve. If the architecture firms or affected parties find any solutions or measures that they feel the government can adopt, they should bring it up and engage with the government,” he concluded.

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  1. The author lacked clarity in main causes of such crisis. The Author should do through research on both Fiscal and Monetary policy? The papers and author specifically blamed Fiscal Policy.

  2. the media have done unlimited studies and published all the causes. do some research yourself sonam. 

    • Yes! you’re right monk. We’ve heard enough from RMA and recently BCCI Chairperson cleared on it and I’ve dealt with Hardware dealers. What are mentioned in this article are all correct. 

    • Heart core DPT


  3. I feels like author thinks, incumbent government has hidden rupee or something else. I think the cause of Rupee crisis is due to the enormous import of goods by all private business owners and individuals (ei.e us). If we dont control import of goods from outside and expend domestic production, even with the revision of fiscal policy, Rupee crisis is not going to get any better, everyone knows this yet, keep thinking, it was due to leadership of incumbent government.

    I personally think that, the stop any sort of loan from financial institutions was the perfect move of the incumbent government before strikes of mortgage crisis for banks and unnecessary import of lots of private vehicles. Everyone feels now the number of vehicles in Thimphu. I sometime feels like i m walking in one of indian town or city.

    lets stop import from outside and start to think how we could survive our self and promote domestic production and export something outside, so we get hard currency. One way to do this is, buy vegetable from top floor in vegetable market… lolz

  4. small time shopper being charged 6-10% more for every commodity has become a established culture and tradition in Jaigoan. i wonder how long such culture will remain, how many of the poor people of Bhutan will be extorted.

  5. There are Bhutanese who give licence to operate to non nationals representing the owner paving the way for fronting and As a result it is indirectly hampering the Ruppe Crisis.This should be stopped at all cost and it is high time they start to cancel the business person and stopped non national representing them.Rule should be made in such  a way that the only national can represent in the business and work permit should be cancelled immediately.

  6. rupee crisis???…..doea that mean there is no US dollar crisis??no Pound crisis????

  7. rupee is foreign currency as much as dollars and pounds are. If there is no rupee crisis then we might as well call ourselves Indians.

  8. We know which political party BCCI chairperson is associated to. So, what he says or writes always has an underlying objective. Rupee crisis is not caused by the ruling government and it also cannot be solved by any government in the immediate future. All Bhutanese must start producing more and importing less.

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