NGAWANG JAMPHEL
Thimphu
In a move to counter the economic challenges faced in the aftermath of the COVID-19 pandemic, the government launched an ambitious Economic Stimulus Program (ESP) on May 18, generously supported by the Government of India (GoI). The initiative aims to address the severe economic contraction Bhutan experienced in 2020 when the GDP plummeted by a historic drop of 10.2%.
PM Tshering Tobgay, speaking at the launch, acknowledged the fragile state of the economy despite notable recovery efforts. He credited the resilience of our economy to the visionary leadership of His Majesty The King who implemented swift and effective interventions during the pandemic.
The measures included subsidizing loan interest payments, deferring loan repayments, and providing livelihood support, which shielded the population and businesses from the worst impacts of the crisis.
Despite the efforts, Bhutan continues to face significant economic challenges. The unemployment rate, particularly among the youth, remains high at 16%. The tourism sector, a critical component of Bhutan’s economy, is still far from recovering to pre-pandemic levels. Financial sector liquidity has been declining since 2020, and Non-Performing Loans (NPLs) have risen to 7.71%, indicating stress within the banking sector.
In response to these pressing issues, the ESP aims to provide immediate relief and stimulate long-term economic growth. The program, supported by a Nu 15 billion fund from India, complements the Nu 85 billion commitment under Bhutan’s 13th Five-Year Plan.
The ESP will inject much-needed capital into the economy through low-interest loans and enhance liquidity within the banking sector. Subsidized loans will be made available to farmers, agricultural enterprises, cottage and small industries (CSIs), startups, and youths pursuing education or home ownership. Businesses under stress will also receive support to help them recover and thrive.
In addition, investments aimed at boosting the tourism sector will include the creation of craft bazaars and night markets, enhancement of existing tourist attractions, and development of new products. Efforts to improve roadside amenities are also planned.
To increase tourist inflows, new air connections to key markets in India and beyond will be pursued, with subsidies provided if necessary. Additionally, Bhutan festivals will be organized in various Indian cities to promote Bhutan as a prime tourist destination.
The ESP will also focus on creating job opportunities and fostering entrepreneurship. A significant portion of the funds will be dedicated to skills training programs aimed at equipping the youth with the necessary skills to succeed in various industries. This initiative is expected to reduce youth unemployment and curb the brain drain, which has seen many young and mid-level professionals leaving Bhutan for better opportunities abroad.
Further, to ensure the effective implementation of the ESP, a dedicated ESP Secretariat will be established under the Cabinet Secretariat. This body will oversee all programs and activities related to the ESP, ensuring they are executed efficiently and effectively. Additionally, enabling policies, rules, and regulations are being reviewed and streamlined, with completion expected in the next two weeks.
In conjunction with the launch of the ESP, the Prime Minister announced the lifting of the moratorium on new housing construction loans effective July 1, 2024. Similarly, the moratorium on vehicle imports will end on August 18, 2024. These measures are expected to stimulate the construction sector and increase consumer spending, further bolstering the economy.
The Indian Ambassador Sudhakar Dalela announcing the first tranche of Nu.2.5 billion said that the ESP is designed to remunerate the economy through investment in priority sectors which include agriculture and livestock, tourism, cottage and small industry, startups, and skill development all of which will have a huge impact of the life of the people.
“The ESP is expected to increase the domestic output and create employment opportunities thus bolstering the attainment of microeconomic objectives and propelling the economy towards a high-growth trajectory,” he added.
The PM expressed deep gratitude to the government of India for its unwavering support. He particularly acknowledged Prime Minister Narendra Modi’s role, highlighting India’s continued assistance in Bhutan’s economic development. The Government of India had previously supported Bhutan with a Nu 5 billion economic stimulus package during the 11th Five Year Plan when the economy was under distress.
The ESP’s launch comes at a critical time for Bhutan, providing renewed hope and much-needed support to an ailing economy. Through strategic investments and comprehensive support measures, Bhutan aims to navigate its way to sustained economic recovery and growth.
The government’s proactive approach, coupled with the generous support from India, sets a promising foundation for overcoming the economic challenges posed by the pandemic and ensuring long-term prosperity for the nation.
