Three crises that created the Rupee crisis


The rupee crisis is a combination of three other crises affecting the Bhutanese economy.

They are namely, the trade crisis, the financial management crisis and also the individual lifestyle crisis.

The rupee crisis being an individual lifestyle crisis can be best summed up in the saying, ‘Bhutan is a poor country with rich people’. At the macro-economic level Bhutan is a least developed country dependant on 40% to 50% for our needs from foreign grants and donors.

However, the lifestyle of many Bhutanese would lead any undiscerning tourist to conclude that Bhutan is a rich country. This is because our streets are jam packed with the latest foreign cars and SUV’s, archery compound bows costing up to Nu 100,000 is a common item, silk ghos and kiras costing the sky are a norm and we have to have the latest gadgets etc.

Many young and new professionals who earn a limited salary take financially suicidal decisions like sacrificing around 40 to 50% of their monthly pay in car loans. This is all the more incredible in a small town like Thimphu when everything is within a walking distance.

Financial planning and saving for a rainy day is non-existent in most Bhutanese families. Tomorrow, if free health care and free education is withdrawn by the government than many families including middle class families will be in trouble.

Ultimately a nation’s economy is the reflection of its household budget. Like the national budget Bhutanese household budgets are riddled with debts and also unnecessary expenditure.

Bhutan as an Asian country has many Asian values like respect for elders, strong culture and etc, save for one, which is a habit of saving.

It would be cruel to say that Bhutanese people should become like the Indians, Chinese etc in their finances. Instead our ancestors are the best examples in how to be economical, self reliant and not wasteful.

The rupee crisis is also a trade crisis. Bhutan is becoming a nation of shopkeepers with under 30,000 business licenses. In short we produce, manufacture and export virtually nothing.

Apart from a handful of credible industries many of our business houses are more interested in commissions than real industries.

A snapshot of Bhutan’s real economy is subsistence farming, subsistence shops and subsistence salaries. In the long term if the government can solve the trade crisis then the rupee crisis will be a non issue.

From the government’s side it is high time for aggressive economic nationalism. An obvious example is the hydropower projects where Bhutanese contractors, Bhutanese suppliers and Bhutanese employees should be given preference over the Indian contractors. The projects may cost a bit more, there may be some delays and even technical glitches but the long term benefit will be worth the short term awkwardness.

Bhutan sits in between the world’s two largest markets of India and China and so our trade and industrialization strategy should be aimed at catering to these high growth markets.

The private sector should also learn to be focused and specialize instead of one business house getting into everything from small time quarries to selling doma.  De-monopolization, transparency and level playing field is also important as private sector growth should not be mistaken for the creation of family run oligarchies. The need of the hour is new and innovative ideas.

Last but not the least the rupee crisis is also the result of a financial management crisis. A BCCI study has shown our consumption and rupee deficit is directly related to government expenditure. For example each time there is a pay hike the sale of cars and also housing loan applications go up. The start of hydro-projects is linked to a dramatic decline in rupee reserves.

All of this should be factored into the planning of government expenditure so that our budget and fiscal policies can go beyond only balancing the capital and current expenditures.

There is however a reluctance by the RMA and the finance ministry to accept responsibility in the age old tradition of buck passing. The RMA governor in his initial telecasts especially at the RMA conference blamed high government expenditure as the cause for the crisis but then for reasons unknown in subsequent telecasts the tune changed to blame private consumption and the private sector. Also, hiding the fact that there is a crisis and then blaming the media for blowing the issue out of proportion is not financial management by any standards.

On the government’s part Bhutan saw record deficits only from 2009 onwards while if RMA knew that rupee crisis was a long standing issue why was there no attempt to create a rupee reserve.

In the end the rupee crisis was in the making for a long period through the combination of the above three crises creating the perfect financial storm.

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  1. Exactly Rs crisis is not because of individual consumption. What will individual do if he or she has enough credit to spend? Obviously, he or she will spend by any means to lead a comfortable life. At the individual level we cannot do anything because we are worried only about ourselves. If we have money we will spend. That is why there is a national government to carefully manage our economy. That is why we have RMA to govern the financial system of our country. If you are responsible for managing our economy and financial system then why I should be blamed for the Rs crunch? There is no reason to pass the buck to citizens and consumers. But it is sad that our leaders will never see in this way. That is why we need new generations of leaders.

    • Blame game should stop,and it s high time to articulate the situation by every individual.
      The main cause of Re- inflation is due to low trade outflow from our country, week financial management by the central financial authority and of course,  so called individual life styling of the Bhutanese  people.
      Now its time for action by the government and the people

  2. Over the years I have observed one important character of Bhutanese people and i.e “artificial”
    Everything is artificial.  Look at the land value. Artificial inflation.  the land value around the country is being excessively / artificially increased way beyond the actual value. Just as an example, if tomorrow government wish to move some of our corporate head offices and other developmental activities like Edn. city, medical college and others which will drag few thousand people away from Thimphu, the economy will collapse. Houses will go without tenants, which means house owner will have not monthly installment and ultimately Bank will collapse. 
    Other Artificial character is our lifestyle. We Bhutanese like to show what we are not. We may try to show that we are rich by driving SUVs but in actual if we observe closely, around 90% of people who drive SUVs and foreign cars cannot afford to take Nu 100 worth lunch in a restaurant everyday. 95% of the people who drive foreign cars are in loan. This was evident from the Bank stopping car loan just recently. There are very very few people who can afford to buy car even the cheapest Indian make Alto car in cash.

    We need to change our character and govt. should help stop artificial inflation…

  3. The blame game must stop. It is high time the Govt admit it made a mess of the economy and start correcting it. But as long as Govt’ keeps blaming everyone but the people who hold all the controls of the economy we are hiding from the truth. 

    The govt must lead by example. Admit to the mistake it has made and move on otherwise we will never find the real solution.


  4. “It would be cruel to say that Bhutanese people should become like the Indians, Chinese etc in their finances”, this statement show the writer has no idea what it means. LOL

  5. Great analysis. Very well written article. As a common Bhutanese myself, I can say that the findings on the individual habits/lifestyle is absolutely true. There are two things which is very dangerous for our country and works totally against our GNH principle: the importance of status symbol and the habit of passing the buck and not willing to take responsibility. Both of these have been very well captured in this article.

  6. There is only one reason for the present crisis- it is unsound economic policy. If you put import licences and money in the form of car loans in the hands of the people, they would definitely buy cars. “After all who wants to walk when everybody else is driving” ? Why are the people taking loans because they are available.

  7. what is the role of aum neeten zam she should write in kinsel which class of pple what type of car. let us nt misuse the name BHUTAN. som ple they import car from japan. some pple don’t hav chaple to ware hehe. this is this is the correct defination of we droukpa hehehehe

  8. Dr. S.K. Sharma, Associate Professor

    It is high time that the Bhutanese Economy is allowed to get  liberalized by inviting Foreign Direct  investments (FDI) and develop some export oriented industries. Allow  Export oriented service sector (particularly International tourism) to emerge and  grow.

  9. Both RMA & financial institutes are responsible for this crisis and this is to do credit policy. Our economy is concerntrated only in Thimphu, Phuntsholing, Paro and now in Punakha nad Wangdi Phodrang beacause of Hydro project. This is ostensively created by Financial Institutes by extending credit facilities mostly in above regions. This has encouraged rural-urban migration mostly from east and south adversely affecting regional balanced infrastrustural development. If left unchecked, the senerio will be drastically jeopardized.

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