Asia and Pacific > Bhutan

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International Monetary Fund. Asia and Pacific Dept
The pandemic has had a substantial impact on the economy, straining pre-pandemic gains in income and poverty reduction. The wide-ranging policy measures, including containment protocols, rapid vaccination and booster campaigns, direct income support, and policy support for borrowers and businesses, mitigated the adverse impact on lives and well-being. As the pandemic recedes and in light of the uncertainties from the war in Ukraine, the focus needs to be on securing livelihoods and ensuring strong and job-rich medium-term growth, while minimizing any persistent adverse effects from the pandemic and mitigating risks.
International Monetary Fund. Monetary and Capital Markets Department
This Technical Assistance report highlights that setting up a liquidity forecasting framework would go a long way in establishing a key building block allowing the Royal Monetary Authority of Bhutan (RMA) to fulfil its legal mandate to formulate and implement monetary policy in ways better aligned with current central bank practices. The structural liquidity surplus, mainly due to foreign reserves accumulation, has been broadly stable in the absence of RMA intervention. The paper discusses that the volatility of autonomous factors and the fragmentation of the money market justify ambitious steps by the RMA towards setting up a liquidity management framework. The mission identified several constraints and gaps that need to be addressed to support the effectiveness of a liquidity forecasting framework. The mission’s recommendations presented in the report aim at streamlining the processing of the Government’s financial transactions and cash balances. Looking ahead, monetary policy transmission would benefit from developing RMA’s liquidity forecasting and management capacity.
International Monetary Fund. Statistics Dept.
As part of the IMF-South Asia Regional Training and Technical Assistance Center (SARTTAC) work program, a technical assistance (TA) mission on external sector statistics (ESS) was conducted during April 2–13, 2018. The mission assisted the Royal Monetary Authority (RMA) in compiling and disseminating external debt statistics (EDS) consistent with the international investment position (IIP), reviewed the compilation method of direct investment statistics, and assessed the coverage of external flows related to hydropower projects.
International Monetary Fund. Asia and Pacific Dept
This 2018 Article IV Consultation highlights that Bhutan continued to make strides in raising per capita incomes and reducing poverty as it concluded the 11th Five Year Plan in 2018. Notably, poverty declined from 12 percent in 2012 to 8.2 percent, and extreme poverty fell to just 1.5 percent. The country is poised to transition to middle-income status, with per capita incomes at nearly US$3,600 in 2018, up from US$1,100 in 2004. Growth has remained robust, averaging 6 percent over the 11th Plan. In FY2018, growth is expected to slow to 5.8 percent from 7.4 percent in FY2017, reflecting slowing construction activity of hydropower projects set to come on stream in 2018 and beyond.
International Monetary Fund. Statistics Dept.
This Technical Assistance Report discusses the findings and recommendations made the IMF mission to assist the Bhutanese authorities in improving estimates of annual GDP, and in developing methods for compiling quarterly GDP estimates. The mission found that the National Statistics Bureau (NSB) is engaged in a range of projects to improve Bhutan’s national accounts statistics. Updated annual GDP statistics signal an improvement in data quality, which should enhance policymakers’ ability to formulate and operationalize evidence-based decisions. Significant improvements to Bhutan’s national accounts statistics can be achieved using a three-step process. The NSB should also keep in mind the need to incorporate methodological and conceptual/definitional revisions during the benchmarking and rebasing process.
International Monetary Fund. Asia and Pacific Dept
This paper discusses the recent economic developments, outlook, and risks for Bhutan. Following a slowdown in activity in the wake of the rupee shortage, economic growth has picked up more recently. From an average of about 8 percent during the Ninth and Tenth Five-Year Plans spanning fiscal years (FYs) 2003/04–2012/13, real GDP growth fell below 4 percent in FY2012/13 and FY2013/14. Bhutan’s medium-term outlook remains favorable. Commissioning of new hydropower generation projects will boost output, exports, and fiscal revenues. However, domestic risks stem from the need to manage high debt and potentially volatile hydropower-related inflows, which may fuel rapid credit growth and lead to renewed external pressure.
International Monetary Fund. Asia and Pacific Dept
This Selected Issues paper describes the current tax system in Bhutan and suggests options for tax policy reform. Though significant hydropower revenues are expected in the medium term as major projects come on-stream, reforms to the existing tax system in the interim will generate fiscal room and prevent recourse to domestic debt to finance development needs. Key reforms include reducing tax exemptions in the near term and introduction of value-added tax in the medium term. The paper also analyzes the adequacy of international reserves in Bhutan using a customized risk-weighted metric. The results indicate that Bhutan’s reserve levels are ample.