A stronger and ro­bust econ­omy to­day – PM

Business Bhutan - - Front Page - Yen­ten Thin­ley from Thim­phu

Com­pared to five years ago, the coun­try’s econ­omy to­day has be­come stronger and more ro­bust with Gross Do­mes­tic prod­uct (GDP) in­creas­ing from Nu 100bn in 2013 to Nu 180bn as of now.

This was de­clared by Prime Min­is­ter Dasho Tsh­er­ing Tob­gay, while pre­sent­ing ‘The State of the Na­tion’ re­port to the sec­ond ses­sion of the par­lia­ment Thurs­day.

The growth in GDP has re­port­edly al­lowed the coun­try’s econ­omy to be iden­ti­fied as one of the fastest grow­ing in the world by sev­eral re­puted in­ter­na­tional in­sti­tu­tions such as the World Bank, Asian De­vel­op­ment

Bank and the Econ­o­mist.

With GDP growth fig­ures reach­ing as high as 8% in 2016 and about 7% in 2017, the Prime Min­is­ter said the econ­omy will grow even fur­ther with the com­mis­sion­ing of the Mangdechu Hy­dropower Project this year.

At the com­mence­ment of the 11 Plan, the first pri­or­i­ties of the govern­ment, ac­cord­ing to the re­port, was to sta­bi­lize the econ­omy as it was un­der se­vere dis­tress and that GDP growth had slowed to an all-time low of 2.1%, in­fla­tion had reached 13.5%, pri­vate credit had been frozen for sev­eral sec­tors, im­port re­stric­tions were in place, for­eign re­serves had fallen to about USD 920mn and Bhutan’s to­tal trade value slowed to about Nu 85bn.

It was also men­tioned that in­fla­tion is un­der 5% to­day, trade value had reached Nu 104bn and do­mes­tic credit has in­creased to Nu 105bn from Nu 57bn in 2013. The re­port de­scribes an in­crease in do­mes­tic credit as pos­i­tive news as it di­rectly cor­re­lates to the ex­pan­sion of the pri­vate sec­tor and an in­crease in eco­nomic ac­tiv­i­ties.

And to ad­dress the im­ped­i­ment of lack of ac­cess to fi­nance due to high in­ter­est rates, Ly­onch­hen said that in­ter­est rates were re­duced from an av­er­age of 13.41% in 2013 to 10.60% in 2017; the re­duc­tion thus trans­lat­ing to sav­ings of Nu 3.2bn for pri­vate busi­nesses.

Ly­onch­hen also re­ported that do­mes­tic sav­ings has dou­bled from Nu 14.8bn in 2013 to Nu 28.1bn; thus de­scrib­ing it as an im­por­tant sign of grow­ing pros­per­ity and also pro­vid­ing the nec­es­sary cap­i­tal for fi­nan­cial in­sti­tu­tions to lend and gen­er­ate in­creased eco­nomic ac­tiv­i­ties.

Ly­onch­hen said he was also glad to re­port that for­eign ex­change re­serves have in­creased from USD 920mn to al­most USD 1.2bn. Of this, In­dian Ru­pee re­serves alone stand at Rs 18.6bn; cit­ing it as a sig­nif­i­cant im­prove­ment since 2012 when the coun­try was still reel­ing un­der the im­pact of the Ru­pee cri­sis. Dur­ing that pe­riod, Ru­pee re­serves fell to just Rs 1.5bn and the govern­ment had to bor­row Ru­pee at high in­ter­est rates.

Ac­cord­ing to the re­port, ex­ter­nal debt has in­creased from Nu 95bn to Nu 170bn be­cause of hy­dropower loans. Hy­dro loans in­creased from Nu 5bn to Nu 132bn in the 11th Plan; sim­ply trans­lat­ing to a lot of hy­dropower work hav­ing been car­ried out on the ground.

The re­port fur­ther states that non-hy­dro loan de­creased from Nu 41bn to Nu 37bn in the 11th Plan.

Fur­ther, Ly­onch­hen men­tioned that no debt was taken for the es­tab­lish­ment of cen­tral schools, pro­cure­ment of off-road util­ity ve­hi­cles, power tillers and he­li­copters.

Ly­onch­hen also in­formed that rev­enue from taxes al­most dou­bled from 58bn in the 10th Plan to Nu 102bn in the 11th Plan de­spite the govern­ment hav­ing re­duced or waived sev­eral taxes in the last five years.

Ac­cord­ing to the re­port, the trade deficit in 2012 was Nu 24.7bn (25% of the Gross Do­mes­tic Prod­uct), while in 2017 it was Nu 29.7bn (17.4% of GDP). How­ever, it is stated that trade deficit is still a cause for con­cern and the only sus­tain­able so­lu­tion to this sit­u­a­tion is to di­ver­sify our econ­omy by build­ing pro­duc­tive ca­pac­ity to in­crease ex­ports and re­duce im­ports.

Ly­onch­hen said the main driver of the econ­omy, how­ever, con­tin­ues to be hy­dro power and that gross earn­ings from hy­dropower in the 11th Plan amounted to Nu 75.2bn com­pared to Nu 45.85bn in the 10th Plan. The in­crease in earn­ings was mainly on ac­count of in­crease in ex­port tar­iff.

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