Re­serves suf­fi­cient to fi­nance 13 months of im­ports: RMA

Bhutan Times - - Home - Biku Gu­rung

Bhutan’s real GDP growth slowed down to 2.1% in 2013 from 5.1 per­cent in 2012. This was re­ported as per the mon­e­tary pol­icy state­ment 2015 re­leased by the Royal Mon­e­tary Au­thor­ity. In their re­port the state of Bhutanese econ­omy the re­cent de­vel­op­ments amongst the ma­jor eco­nomic sec­tors, the sec­ondary sec­tor recorded the high­est growth at 3.5% fol­lowed by the pri­mary sec­tor at 2.9% and ter­tiary at 0.3%. Sec­tors that per­formed rel­a­tively well and con­trib­uted to the over­all growth in 2013 were min­ing and quar­ry­ing (36.2%); elec­tric­ity and wa­ter (10.7%); and agri­cul­ture, live­stock and forestry. The man­u­fac­tur­ing, con­struc­tion and gen­eral gov­ern­ment sec­tors dis­played neg­a­tive real growth in the year. At the sec­toral level, the ter­tiary sec­tor con­sti­tuted 41.5% of GDP fol­lowed by the sec­ondary and pri­mary sec­tors with 42.3% and 16.2%, re­spec­tively.

From an av­er­age of 9.6% in fis­cal year 2013 -14, Bhutan’s quar­terly in­fla­tion has fallen to 6.7% in the De­cem­ber quar­ter of 2014. In­fla­tion has also fallen when com­pared to 11.3% in the same quar­ter of 2013. The de­cline was driven by a sig­nif­i­cant drop in food in­fla­tion from 14.5% in the De­cem­ber quar­ter of 2013 to 6% in De­cem­ber 2014. Price lev­els in In­dia as fea­tured by their Whole sale price in­dex (RBI) grew by 0.7% dur­ing the fourth quar­ter of 2014 com­pared to 7% in the same quar­ter of 2013. 3.

Ac­cord­ing to the cen­tral bank re­port Bhutan’s bal­ance of pay­ments, Bhutan’s cur­rent ac­count deficit in­creased from Nu.27.5 bil­lion in fis­cal year 2012-2013 to Nu.28.8 bil­lion in fis­cal year 2013-14. The cur­rent ac­count deficit con­tin­ues to re­main el­e­vated, reach­ing an es­ti­mated 27.6 per­cent of GDP in fis­cal year 2013-14. While the trade deficit in­creased only marginally in the year, by 1.8 per­cent, the deficit has per­sisted at a large level, reach­ing Nu.22.4 bil­lion or 21.5 per­cent of GDP in the year. Deficits also per­sist in the ser­vices and pri­mary in­come ac­counts, with the ser­vices deficit in par­tic­u­lar al­most dou­bling from last year, but mainly be­cause of im­proved cov­er­age of data.

The net in­flows in the cap­i­tal and fi­nan­cial ac­count were more than suf­fi­cient to fi­nance the cur­rent ac­count deficit. In par­tic­u­lar, In­dian Rupee de­nom­i­nated hy­dropower loans in­creased by 10.5 per­cent from 14.8 bil­lion to 16.3 bil­lion. Ad­di­tion­ally, 9.4 bil­lion, an al­most equiv­a­lent amount as in the last fis­cal year was re­ceived in fis­cal year 2013-14 as grants for hy­dropower de­vel­op­ment. Af­ter ac­count­ing for other flows in the cap­i­tal and fi­nan­cial ac­count and the net er­rors and omis­sions, against a cur­rent ac­count deficit of Nu.28.8 bil­lion, the cap­i­tal and fi­nan­cial ac­count sur­plus stood at Nu.31.4 bil­lion with a sub­se­quent in­crease in re­serves by an equiv­a­lent of Nu.6.1 bil­lion. At the end of the fis­cal year, gross in­ter­na­tional re­serves stood at USD 997.9 mil­lion in­creas­ing from USD 916.9 mil­lion as of end-June 2013. Re­serves were suf­fi­cient to fi­nance 13.0 months of mer­chan­dise im­ports while cov­er­ing 56.9 per­cent of public ex­ter­nal debt. Of the to­tal re­serves, USD 829.3 mil­lion were con­vert­ible cur­rency re­serves while 10.1 bil­lion were In­dian Rupee re­serves.

The cen­tral bank re­port fur­ther states that Bhutan’s ex­ter­nal debt obli­ga­tions as of De­cem­ber 2014 to­taled USD 1.8 bil­lion, in­creas­ing by 4.8% from the end of fis­cal year 2013-14 as of June 2014. Of the to­tal, 33% were out­stand­ing con­vert­ible cur­rency loans and the re­main­ing 67%, In­dian Rupee de­nom­i­nated debt which are mostly for hy­dropower de­vel­op­ment. Over­all debt ser­vic­ing fis­cal year 2013-14 amounted to an equiv­a­lent of USD 25.4 mil­lion for con­vert­ible cur­rency debt and 9.4 bil­lion for In­dian Rupee debt. For the first half of 2014/15 (up to De­cem­ber 2014) debt ser­vic­ing has amounted to USD 15.4 mil­lion on con­vert­ible cur­rency debt and 1.9 bil­lion on Rupee debt. As of De­cem­ber 2014, Bhutan’s to­tal debt out­stand­ing stood at 111.9% of GDP and the debt ser­vice ra­tio at 27.9%.

On the fis­cal front, ac­cord­ing to the latest up­dates from the Min­istry of Fi­nance, to­tal rev­enue in­clud­ing grants in­creased from 30.4% of GDP in 2012-13 to 33.9% of GDP in fis­cal year 2013/14. On the other hand, to­tal ex­pen­di­ture fell from 36.2% of GDP in 2012-13 to 31.1% of GDP in 2013-14 be­ing the first year of the 11th five-year-plan with the fo­cus on mo­bi­liz­ing re­sources and car­ry­ing out prepara­tory in­vest­ment works the re­port fur­ther added.

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