The Economy

The price of diesel going up by Rs five per liter is only one more piece of bad news for an already struggling Bhutanese economy.

With diesel being the fuel used by trucks the cost of transportation and conversely the price of goods will go up like vegetables, meat, construction materials etc.

This is in the backdrop of news that financial institutions would still not be able to lend even if many Royal Monetary Authority restrictions are lifted.

As a consequence several business houses big and small will have to go through a much longer than anticipated period of credit crunch. This will also hit individual citizens who may have planned to buy or build their dream home.

With business houses unable to get credit there are many who are deliberately defaulting on their loans with financial institutions.

The rupee crisis still continues unabated. The most damaging aspect of this crisis has been the devaluation of the Ngultrum with the result that our imports are more expensive than before.

The government cutting down on their expenditure has not only affected the government programs but also various businesses that depend upon them.

At the international level our biggest donor India along with many emerging markets are going through the doldrums. Economic data from our other big donors like Japan and the European Union is getting worse shrinking their capacity to help us.

This is also in the backdrop of global donor assistance as per the 2011 Istanbul Least Developed Countries conference shifting their focus from Asian countries to African countries.

As a result donor assistance has slowed and even shrunk in many cases.

In hydropower, news from the Indian newspapers indicate that less than half of the money required for three key hydro projects has been released due to budget constraints in India.

With all of the above happening there are early signs that the private sector is laying off people from their jobs as businesses cut back to save costs. This will increase unemployment levels especially for the youth.

However, for a country on the brink of a crisis that only looks to get worse there is a remarkable sense of calm and also complacency.

The complacency, however, is not only with the government but also among citizens in general who are still keeping up lifestyles and living costs that are not advisable under the current scenario.

One sign of this is that banks in spite of increasing interest rates are still unable to attract savings when citizens in other countries like India, China, USA and etc are saving more than before.

While it is important not to panic there is a feeling among many sectors of the economy that the government can do more than it is currently doing.

According to opinions expressed in various news articles, meetings and the social media the government is misplacing its priorities with less important issues taking precedence over the economy.

The government and the country as a whole must focus on dealing with the above economic challenges which if not addressed adequately can cause economic pain and have social consequences.