One of the causes of the ongoing Rupee and Credit crises is the lack of a saving culture in Bhutan.
Many Bhutanese citizens instead of saving away excess money used it for imports like cars, luxury items, holidays, etc contributing to the Rupee shortage.
Banks are unable to give out loans partly because there no adequate levels of fixed deposits or long term savings contributing to the Credit Crunch.
Apart from national crises and the nation’s economic well being, ordinary Bhutanese should start saving for the sake of their family’s future financial security.
The current two crises should not only serve as lessons to be learnt for the government and the financial system but also for ordinary citizens.
With the onset of development and globalization in Bhutan, the last few decades has seen many ordinary Bhutanese living a lavish and credit oriented lifestyle far beyond ones actual income.
Credit is welcome in an economy if it going to be put into use to create more income or capital like a business or an investment, but definitely not when it is used to finance one’s own lifestyle.
In Bhutan, when a young person gets his first job the immediate instinct is to go for as many loans as possible from vehicle loans to consumer loans, all to finance a lifestyle that should ordinarily be sought only once he or she is financially more secure.
The high deduction from the person’s salary leaves an insufficient income and so the person is caught in a vicious circle of taking more loans for meeting even basic requirements.
Apart from a lack of financial awareness and a consumerist lifestyle, this trend is also facilitated by the Welfare State economy where the government provides freed education and healthcare.
The welfare state in Bhutan’s socio-economic context is entirely welcome and necessary as a social security net, especially for the needy, but it also does not mean that ordinary Bhutanese should not be saving.
An adequate amount of savings can serve various useful purposes. The most immediate use can be during various medical and other emergencies when a family needs ready cash. Savings can be also used in the long term for buying a family house or securing ones children’s educational future.
Savings by itself generates more income through the interest rates in banks or using it to invest in a new business.
Both for the nation as a whole and also as an individual, a culture of saving allows one to curb unnecessary and wasteful expenditure, while at the same time providing necessary capital for income generating activities.
For example when a person saves his money in the bank he or she does not only limit imports but also provides our industries and productive sector with loans to increase exports.
The act of saving by itself will inculcate financial discipline and awareness which is a must for a stable and happy life.
Savings in Bhutan’s context will also be good for the nation’s collective health and environment. It will lead to an automatic drop in unnecessary requirements like junk food, cars, alcohol, tobacco, plastic, etc.
Many in Bhutan do save on a short term basis but the money is again used frivolously in either a shopping spree or some unnecessary expenses.
In the Bhutanese context saving becomes tricky when one person is supporting not only his or her immediate family but also extended relatives in rural areas. In such a scenario financial discipline and intelligent saving is even more important. By limiting one’s own needs we can not only save for our future but also provide in a better manner for our loved ones and dependants.
The first few steps to saving is tracking ones expenditure, prioritizing ones expenses and determining how much can be saved. Financial instruments like life insurance can also be used not only to save but also provide financial security and reduce ones tax burdens as life insurance premiums are deductible from the taxable amount.
The government, central bank and financial Institutions should also actively promote a culture of savings and investment through fiscal and monetary policies and also various incentives and schemes. The Stabilization Fund as the government’s saving plan for excess revenue is a good idea.
There is general agreement that the Bhutanese economy is overheating but what ordinary citizens must keep in mind is that the national economy is only a greater collection of our own economic habits. It is therefore important to adopt financial discipline and save wisely to avoid an economic meltdown in our own homes.