Finance ministry to form task force for economic recovery

The GDP growth is projected to improve by 3.3% in 2021-22 in a ‘V’ shaped recovery

The finance ministry will institute a National Economy Recovery Taskforce (NERT) to strategize economic recovery measures during and post COVID-19, said Finance Minister Namgay Tshering.

The taskforce will have four technical committees; each representing real, fiscal, external and monetary sector.

“As a path to sustained and accelerated recovery, we will ensure that the private sector is made more inclusive and kept at the forefront of all national policies with necessary policy or technical backstopping and hand-holding services,” said Lyonpo.

He said economic recovery strategies would be drawn to strengthen the functioning of the State Owned Enterprises through promotion of broad-based ownership (divestment of shareholding).

According to the Lyonpo, Druk Holding & Investments as part of diversifying the economic activities has also started venturing into offshore investment portfolios.

Bhutan’s Gross Domestic Product (GDP) since the first positive case of COVID-19 in March to December has decelerated to -6.8%, but the finance ministry had projected the economy to decelerate by -2.1% in the fiscal year 2020-21.

Lyonpo said Bhutan’s economy shock is inevitable given the ongoing economy downturn due to the pandemic and global economy performance, which receded to -15%. South Asia’s average GDP has decelerated to -8.4% and Western Europe’s stands at -8.2%.

“Bhutan being a trade-based economy, the economic growth to certain extent is dependent upon how the countries in our region or trading partners perform,” said Lyonpo. However, Lyonpo said the growth is projected to improve by 3.3% in 2021-22 indicating that Bhutan will follow a ‘V’ shaped economic recovery trajectory.

As per economists, in a V-shaped recovery, after the economy suffers a sharp economic decline, it quickly and strongly recovers and is the best-case scenario once an economy has hit a recession.

Lyonpo said 75% of the country’s trading is done with India and recovery of Indian economy would be beneficial for Bhutan.

The International Monetary Fund has projected the global economic growth of countries that have experienced deep economic recession with average GDP fall of -4.4% in 2020 to bounce back to 5.2% in 2021.

To keep the economy afloat in the wake of pandemic, His Majesty’s ‘Kidu’ came as a huge relief to many and continues to boost public confidence, said Lyonpo.

Additionally, he said that His Majesty The king announcing the establishment of the ‘National Resilience Fund’ to tide over the pandemic while protecting livelihood of people who have lost their primary source of income was a moment of assurance for the Bhutanese.

Building on His Majesty’s Relief Kidu to support lives, livelihood and interest payment waiver, the government has put in place short to medium fiscal and monetary measures, some of which are deferment of loan repayment, deferment of Business Income Tax and Corporate Income Tax, provision of working capital to traders, dealing with supply of essential items at 5% interest, waiver of rental charges to tourism and hospitality offices housed in government properties and relaxation of regulatory measures on Financial Institutions to ensure adequate liquidity in the market.

The government also engaged 233 hotels to serve as quarantine facilities and have injected almost Nu 340mn as cost for the quarantine facilities as of November 2020 including free electricity and WiFi given for hotels serving as quarantine facilities.

Moreover, the charges for high and medium voltage energy users (industries) are based on actual usage while payment of electricity charges for industries are deferred and penalty for late payment of electricity has been waived off.

The government also put in place the ‘Economic Contingency Plan’ in three broad areas; tourism, agriculture and employment amounting to Nu 4bn over and above the planned budget.

These measures are aimed at offsetting the real GDP loss, which accounted to almost Nu 4.8bn in 2020, said Lyonpo.

In order to ensure easy access to financing at lower costs and attract viable projects, the government launched the National Credit Guarantee scheme (NCGS) with credit guarantee up to Nu 30mn.

In the last two months of establishment of NCGS, the government cleared 24 projects amounting to Nu 65mn.

Lyonpo said despite the tangible economic losses, “we could manage to save lives and avert infection in the community to a large extent, which directly or indirectly adds up to our gains in terms of intangible results.”

“Bhutan is not far from having the vaccine, thus the economic and social gains are guaranteed,” said Lyonpo.

Thukten Zangpo from Thimphu