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.
Yenten Thinley from Thimphu