Bhutan’s external balance sheet continues to reflect structural vulnerabilities, with the country maintaining a consistently negative Net International Investment Position (Net IIP). However, beneath this headline pressure, key asset classes are demonstrating resilience, signaling underlying strength in Bhutan’s external economy.
This has been underlined in the Royal Monetary Authority’s (RMA) latest report for December 2025. According to the report, Bhutan’s Net IIP remained entrenched in negative territory throughout the assessed periods—an indicator that the nation’s external liabilities continue to outpace its foreign-held assets. The Net IIP declined from Nu -3,519.3 million in FY 2022/23 to Nu -4,144.0 million in the first quarter of FY 2023/24, with projections pointing to further deterioration, reaching Nu -4,009.5 million by the close of the fiscal year.
Despite the widening deficit in the Net IIP, Bhutan’s foreign assets are charting a quietly encouraging trajectory. In FY 2022/23, total external assets moved from Nu 856.8 million in Q1 to Nu 709.1 million in Q4. In FY 2023/24, asset levels fluctuated yet remained on an upward trend, climbing back to Nu 825.3 million in Q2 and stabilizing at Nu 732.8 million in Q3. Forward estimates for FY 2024/25 suggest accelerating momentum, with assets expected to cross Nu 1,094.7 million by Q3—an important indicator of improving external liquidity buffers.
The asset composition underscores this progress. Currency and deposits—Bhutan’s most liquid external assets—remained comparatively stable, rising to Nu 77.9 million by Q3 FY 2024/25. Trade credits, a key indicator of short-term cross-border business activity, showed volatility but ended on an expansionary note, reaching Nu 185.6 million.
In simple words, the types of assets Bhutan holds also show signs of improvement. Currency and deposits, which are the easiest assets to use or convert into cash, stayed fairly steady over time. By the third quarter of FY 2024/25, they had increased to Nu 77.9 million, showing that Bhutan’s most accessible foreign assets are gradually strengthening.
Trade credits, which represent money that Bhutan is owed for goods and services traded with other countries, moved up and down during the year. Even with this instability, they eventually increased and reached Nu 185.6 million. This rise suggests that Bhutan’s short-term international trade activity is growing, and more payments from foreign trade partners are expected to come in.
Reserve assets, the cornerstone of macroeconomic resilience and external shock absorption, exhibited significant swings. They declined from Nu 675.8 million in Q1 FY 2022/23 to a trough of Nu 553.8 million in Q4 but rebounded strongly the following year, peaking at Nu 849.2 million in Q2 FY 2023/24. Projections for FY 2024/25 place reserve assets at approximately Nu 831.2 million in Q3, reinforcing Bhutan’s capacity to maintain monetary stability amid global volatility.
Bhutan’s external liabilities have maintained a steady upward trajectory, increasing from Nu 4,376.1 million in Q1 FY 2022/23 to a projected Nu 5,104.2 million by Q4 FY 2024/25. Much of this rise is attributed to increased external borrowing and direct investments—both central to Bhutan’s development financing strategy.
The RMA explains that Bhutan’s liabilities, especially loans taken from outside the country have been rising. This increase is not accidental; it is closely linked to the government’s development strategy.
Bhutan has been investing heavily in infrastructure and major national projects, such as roads, hydropower, digital connectivity, and public services. These kinds of large-scale projects require significant funding, and since Bhutan’s internal resources are limited, the country often relies on external borrowing to bridge the gap.
As a result, the amount Bhutan owes to foreign lenders has grown. While this increases liabilities, it also reflects the country’s efforts to build long-term economic capacity and improve national productivity. In simple terms, Bhutan is borrowing more today so it can build important projects that are expected to benefit the country in the future.
Direct investment flows, a critical measure of investor confidence and long-term capital commitment, recorded notable movement as well. From Nu 132.0 million in Q1 FY 2022/23, direct investment surged to Nu 343.4 million in Q3 before tapering slightly. Equity investment—comprising the bulk of FDI—remains on an upward incline, reaching a projected Nu 137.2 million in FY 2024/25. Intercompany lending, another important component of cross-border corporate finance, continues to be a significant driver of the liabilities portfolio.
Fluctuations in the ngultrum–USD exchange rate further shaped Bhutan’s external position. The exchange rate, which averaged Nu 81.6 per USD in FY 2022/23, appreciated to approximately Nu 85.5 per USD by FY 2024/25. This movement affects the valuation of both external assets and liabilities, generating mark-to-market adjustments across the country’s international balance sheet.
In other words, during FY 2022/23, one US dollar cost about Nu 81.6. By FY 2024/25, it cost around Nu 85.5. When the ngultrum becomes weaker like this, the value of Bhutan’s foreign assets and debts—when converted into ngultrum—also changes. As a result, the amounts recorded in Bhutan’s international accounts must be adjusted to reflect these new values.
Taken together, Bhutan’s International Investment Position reflects a small, open economy navigating global economic pressures while gradually strengthening its asset base. The robust performance of reserve assets and the moderate expansion of other asset categories provide a counterweight to rising liabilities and external exposure.
The RMA stresses that it is closely monitoring the economy to keep Bhutan financially stable and protected from outside shocks. This means watching things like inflation, foreign reserves, exchange rates, and debt levels to make sure they remain healthy.
Because the world economy is unpredictable—with currencies fluctuating, global markets changing, and investment flows rising and falling—the RMA wants to ensure Bhutan is prepared. To do this, the central bank is working to strengthen the country’s financial “safety cushions”, such as maintaining strong foreign reserves, managing external debt carefully, and promoting policies that keep the economy steady.
In short, the RMA’s goal is to make sure that no matter what happens globally, Bhutan stays stable, competitive, and capable of handling external pressures. This continued vigilance helps protect the country from economic risks and supports sustainable long-term growth.
Sherab Dorji
From Thimphu
