ADB Pro­vides Fresh As­sis­tance to Strengthen Bhutan’s Econ­omy

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THIM­PHU, BHUTAN — The Asian Devel­op­ment Bank (ADB) is pro­vid­ing fresh sup­port to Bhutan to strengthen its econ­omy. ADB has ap­proved loan and grant as­sis­tance to­tal­ing $36.2 mil­lion for the sec­ond phase of the Strength­en­ing Eco­nomic Man­age­ment Pro­gram. The first phase helped the Gov­ern­ment of Bhutan over­come a liq­uid­ity crunch and to sta­bi­lize the econ­omy in fis­cal year 2013. “To move be­yond hy­dropower-de­pen­dent growth and tran­si­tion to a more bal­anced and in­clu­sive so­cioe­co­nomic devel­op­ment model, Bhutan needs to im­prove its macroe­co­nomic man­age­ment and de­velop its fi­nan­cial sec­tor to sup­port the pri­vate sec­tor and in­fra­struc­ture in­vest­ment,” said Cig­dem Akin from ADB’s South Asia Depart­ment. “The as­sis­tance for bud­get sup­port will pro­vide fi­nan­cial cov­er­age to the gov­ern­ment un­til the im­pact of the pol­icy re­forms gains trac­tion and its own re­sources are gen­er­ated through the pro­gram. This will, over time, help Bhutan achieve its em­ploy­ment and poverty re­duc­tion goals by main­tain­ing sus­tain­able growth.” The sec­ond phase of the pro­gram will sup­port mea­sures to boost gov­ern­ment rev­enues through im­proved rev­enue ad­min­is­tra­tion. This will help fi­nance a larger share of the cap­i­tal and in­fra­struc­ture needs us­ing Bhutan’s own re­sources, and lower its de­pen­dence on ex­ter­nal con­ces­sional loans and grants. To en­hance fi­nan­cial sta­bil­ity, the pro­gram will strengthen reg­u­la­tions and over­sight of the fi­nan­cial sec­tor. The pro­gram will also help boost fi­nan­cial sec­tor devel­op­ment with sup­port tar­geted at non­bank fi­nan­cial in­sti­tu­tions such as pen­sion funds, and the eq­uity and bond mar­kets to di­ver­sify fi­nan­cial prod­ucts and ser­vices. It will sup­port ap­proval of reg­u­la­tions on branch­less bank­ing and mi­cro­fi­nance; ex­pan­sion of mo­bile bank­ing ser­vices into ru­ral ar­eas; and a fi­nan­cial lit­er­acy pro­gram to pro­mote fi­nan­cial in­clu­sion and help mo­bi­lize sav­ings. Ex­panded cov­er­age and ser­vices of the Credit In­for­ma­tion Bureau will help im­prove ac­cess to fi­nance for en­trepreneurs. A study will also be car­ried out into se­cu­ri­tiz­ing Bhutan’s hy­dropower rev­enues to fur­ther raise the gov­ern­ment’s ca­pac­ity to fund new in­fra­struc­ture by ac­cess­ing in­ter­na­tional bond mar­kets. ADB’s loan and grant comes from its con­ces­sional Asian Devel­op­ment Fund. The as­sis­tance will be dis­bursed in two tranches, as pol­icy ac­tions are car­ried out over the pro­gram im­ple- men­ta­tion pe­riod of 18 months. A sep­a­rate ADB tech­ni­cal as­sis­tance grant of $700,000 will also be ex­tended to boost the ca­pac­ity of key in­sti­tu­tions re­spon­si­ble for car­ry­ing out the re­forms. The Gov­ern­ment of Bhutan is pro­vid­ing coun­ter­part sup­port of $49.3 mil­lion. ADB, based in Manila, is ded­i­cated to re­duc­ing poverty in Asia and the Pa­cific through in­clu­sive eco­nomic growth, en­vi­ron­men­tally sus­tain­able growth, and re­gional in­te­gra­tion. Es­tab­lished in 1966, it is owned by 67 mem­bers – 48 from the re­gion. In 2014, ADB as­sis­tance to­taled $22.9 bil­lion, in­clud­ing co­fi­nanc­ing of $9.2 bil­lion.

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