In a sign of the rupee crunch panic spreading, fuel stations and gas depots saw people stocking on these products in anticipation of a shortage.
In an attempt to address such growing national panic the finance minister Lyonpo, Wangdi Norbu said that there is no need for alarm as the RMA would ensure supply of rupees for essential purposes and all ongoing legitimate industrial transactions.
The finance minister also said that the government would be taking two major measures to address the issue. One was increasing the government of India (GOI) credit line of Nu 3bn to Nu 6bn in April. The second is a currency ‘swap’ arrangement with the Reserve Bank of India under the aegis of SAARC Finance also in April.
The government last year had to sell of 200 million dollars of reserves to address the rupee shortage but it was not enough to meet all requirements like servicing rupee loans, paying hydropower debt and meeting normal transactions causing this current crisis.
The current foreign exchange reserve stands at US $ 697.76 million enough to suffice 13 months of imports which is a month more than the constitutional requirement.
The minister also said that a Task Force formed to delve into the issue found that the major reason for the rupee crisis was the huge credit expansion through banks leading to greater demand of exports.
However, many sectors of the economy are still worried despite the assurances.
The president of the Association of Bhutanese Industries (ABI), Rinchen Dorji said, “Earlier the truckers would be paid in Ngultrum but after the announcement, even they have started to think that there won’t be any rupee.” “The panic among ordinary people is dangerous,” he added.
Staff at Damchen Petroleum and other fuel depots said that cars had been lining up because of the fear of fuel running out.
With financial institutions tightening home loans panic is also setting into the real estate sector.
The Managing Director of Gyelsa- Tewa Real estate developer, Tshering Tobgay said “If this continues for longer time, it will severely affect us.” He hoped that the crunch would be solved before it hits them.
Parents with children studying abroad are also worried as some of them have not been able to send money to their children.
Meanwhile there are reports of ordinary citizens already trying to hoard on rupees. The worst hit are those families who are planning to take their family members for treatment to India as the Rs 10,000 a day limit is not adequate for them.
Professor, Sanjeev Metha of the Royal Thimphu College said, “The Rupee crisis is mainly caused by high public and private spending that created high demand for rupee and lack of serious efforts to promote rupee earning from diverse sources. There has been overdependence on hydroelectricity and the present crisis has reached the current level because of slow policy response”.
An economist, Damber Singh Kharka said much of the crunch should be attributed to the construction industry and increasing vehicle imports.
“Import of vehicles actually opens a floodgate in terms of pressure on the Rupees,” he said.
He said the crunch was supposed to be foreseen few years back and corrective measures should have been taken to contain it.
The chief executive officer of Bhutan National Bank (BNB), Kipchu Tshering said that the government must look into improving the agricultural sector.
Meanwhile the Royal Monetary Authority has also taken a series of steps to address the issue.
After banks initially ran out of rupees and all rupee transactions were stopped creating a panic, the central bank met with heads of all financial institutions on March 8 and decided to allow selective imports involving rupee transactions like fuel, oil, raw materials (including manufacturing industries), payments related to government and public sector corporations, import of capital goods, payments on education, medical supplies and equipment, and import of construction materials for constructions approved by Dzongkhag authorities.
Other rupee denominated transactions like payments for education and medical treatment expenses in India are also allowed.
Domestic banks were replenished with Rupees on March 9. However, all transactions need to be supported by documentary evidence. An individual or business entity will have to submit documents to the bank, which will be forwarded to RMA.
The central bank has also reduced the maximum amount of Indian rupees an individual can withdraw in a day from Nu 40,000 to Nu 10,000 not exceeding Nu 50,000 in a month.