ADB commits loans and grants worth USD 1.1bn to Bhutan

USD 60mn worth of loans and grants were provided to Bhutan last year

The Asian Development Bank (ADB) has committed 196 public sector loans, grants, and technical assistance totaling USD 1.1bn to Bhutan with the increasing loan and grant disbursements to Bhutan amounting to USD 799.08mn.

The ADB is one of Bhutan’s largest sources of official development assistance, with average annual lending of USD 52.1mn, including USD 25.6mn loans and USD 26.5mn grants from 2018 to 2021.

According to the ADB, these were financed by regular and concessional ordinary capital resources of the Asian Development Fund, and other special funds. ADB’s ongoing sovereign portfolio in Bhutan includes nine loans and 10 grants worth USD 345.9mn.

In 2021, the ADB provided USD 60mn in loans and grants to Bhutan, which includes a USD 30mn loan to strengthen financial institutions and promote financial inclusion, a USD 24mn loan, and USD 6mn grants to support the government’s efforts to provide safe and affordable housing.

In addition, the ADB provided USD 3.75mn in technical assistance to Bhutan last year. These technical assistance projects helped conduct due diligence for new projects, implement ongoing projects, and support needed institutional reforms and capacity building.

The technical assistance includes USD 0.5mn to support the strengthening of the financial market, USD 1.3mn to help prepare a renewable energy program, USD 0.5mn for a skills development program, USD 1mn to help provide affordable housing, and USD 0.5mn to help reform the financial sector.

However, the ADB is increasing lending to expand energy, urban, transport, and water infrastructure; facilitate policy reforms to diversify the economy and catalyze the private sector, and promote human capital development.

The government’s capacity to design and implement large development projects needs to be strengthened, as does project readiness regarding design quality, procurement planning, safeguards due diligence, and implementation capacity. Bhutan’s rugged terrain, poor road network, and skills deficit pose additional challenges for designing and implementing projects.

Meanwhile, Bhutan’s Gross Domestic Product grew by an estimated 3.5% in 2021, reversing a deep 10.1% contraction in 2020 owing to the strict COVID-19 containment measures imposed by the government.

Further, Bhutan has made significant progress in terms of increasing life expectancy, expanding immunization rates, and raising school enrollment. It is on track to graduate from the United Nations’ list of least-developed countries by 2023.

With this, the ADB’s support is aligned with several key development objectives of Bhutan’s 12th Five-Year Plan, 2018–2023, including strengthening technical and vocational education programs, health services, water supply, and urban amenities.

As of 31 December 2021, comprising 14 projects and programs totaling USD 389.05mn the energy sector has the highest share in terms of lending volume followed by water and urban, agriculture and natural resources, finance, transport, health, and education.

Kinley Yonten from Thimphu