The Rupee Shortage Task force report submitted on 5th March 2012 is overall a comprehensive report that gives dire warnings if measures both short term and long term are not taken to curb the crisis.
The strength of the report is indisputable facts and figures that show that the Bhutanese economy is overheating. There is also critical acknowledgement of the scope and size of the problem complete with historical context.
However, it also has a few weaknesses. One is the interpretation of information. The report concludes that the majority of the blame must remain with the private sector and private consumption. This is while facts in the report show that government expenditure and the RMA’s reserve management also played a role in the crisis.
The publicity of this report was done in such a way in which the role of the RMA’s rupee and reserve management and role of the government expenditure in the crisis was glossed over and the blame was put mainly on the private sector and private consumption.
The report though compiled within two months should have taken feedback from the private sector. Be it news writing for a newspaper or report writing for the government, you have to interview the subject you are writing about or at least give them a chance to explain.
The report it seems also has not done enough consultation with the financial institutions. Though all the credit and loan figures are present there is no voice from the banks in the report.
An important part of the report is the recommendations to deal with the crisis, many of which the RMA and the government is implementing. Here too the voices of the private sector and financial institutions are missing. Their recommendations would have enhanced the credibility and content of the report.
The report has been written by a group of economists, financial experts and civil servants using government data which are all credible in their own right. However, while an economist can draw you the most advanced theoretical financial charts it is only the businessman who can make you the money or the banks that can provide the financial muscle. Their feedback even if it is self-serving would have enhanced this report.
In giving recommendations one of the cautionary points of the report is that while restricting credit it should be done in a balanced way otherwise it can lead to a contraction in the economy. The RMA seems to have ignored this caution and has instead created such a hostile and panic driven environment that all financial institutions except for BDBL have stopped giving any loans.
The result of this report is that a lot of pain is being imposed on the private sector from banning of imports to restricting credit. There are already stories of private companies laying of people leading to more unemployment.
However, a key recommendation of the report which is to rationalize or do away with the vehicle quota system has not even been discussed by the government. This may be interpreted by those in the private sector as the government treating the private sector as second class citizens compared to the civil servants.
The report would have been far stronger if Bhutan had an economic think tank. While we have a GNH think tank it is high time that the government form an economic think tank composed of members of the government, RMA, civil society, media etc.
This report is also a reflection of the saying ‘that a stitch in time saves nine’. If the Bhutanese economy and state is to be saved from such crises our system must learn how to accept criticism and then act on it. A lot of the ‘post mortem’ information and conclusions in the report was available much earlier but our system and society as a whole is so hostile to criticism that even people in the know prefer to keep quite or sugar coat the truth until it is too late.