In a significant development for Bhutan’s economic recovery, the Economic and Finance Committee (EFC) of the National Assembly (NA) has submitted a series of recommendations on the Economic Stimulus Plan (ESP). The Chairperson of the Committee, Rinchen Wangdi, Member of Parliament (MP) for the Bartsham Shongphu constituency, presented the recommendations on November 29 during the ongoing Parliament Session.
Immediate Disbursement of the Remaining Budget
The EFC emphasized the urgent need for the immediate disbursement of the remaining Nu. 10 billion of the ESP budget. The committee noted that swift execution of the ESP is essential to effectively bridge the economic gap caused by the pandemic. Tranche-based releases, it argued, slow down implementation and resemble standard development plans, which are ill-suited for addressing urgent economic needs. The EFC urged the government to prioritize immediate action to restore the economy, stressing that timely implementation of planned activities is crucial for achieving the program’s objectives within the designated two-year period starting on May 19, 2024.
Focus on High-Return Investments
The committee raised concerns about the allocation of ESP funds, noting that some have been directed toward recurrent expenditures, such as capacity building and skills development, instead of high-return projects. The EFC recommended that funds be allocated to initiatives with clear economic returns to align with the program’s goals and maximize its impact on economic recovery.
Risk-Sharing Mechanisms
To address concerns from participating financial institutions (PFIs) about high risks, the EFC suggested introducing subordinate debt options and other risk-sharing mechanisms. These measures would encourage PFIs to provide concessional credit under the ESP, reducing their financial exposure and stimulating lending activities.
Expanding Sectoral Coverage
The EFC highlighted that key economic sectors, such as hospitality, exports, surface collection, and stone quarrying, have been excluded from ESP support. The committee recommended including these high-potential sectors to harness their contributions to substantial economic recovery.
Standardized Standard Operating Procedures (SOPs)
To address inconsistencies caused by the lack of uniform guidelines among PFIs, the EFC proposed the development and implementation of standardized procedural guidelines. These would eliminate excessive technical clearances and establish fixed turnaround times for loan processing, thereby improving program accessibility and efficiency.
Turnaround Time and Documentation Simplification
The committee noted that lengthy processing times and complex documentation requirements are hindering loan accessibility. It called for simplifying application processes, reducing documentation requirements, and establishing fixed timelines for processing to enhance program efficiency.
Addressing Non-Performing Loans (NPLs) and Insolvency Issues
The EFC also addressed the issue of rising non-performing loans and insolvency risks, which pose significant financial challenges. It urged the government to expedite the legislative proposal for a new Insolvency Bill to effectively manage NPLs and mitigate insolvency risks tied to ESP-supported projects, ensuring long-term financial sustainability.
Background and Recommendations
The ESP was introduced to mitigate the economic downturn caused by the COVID-19 pandemic, with a total budget of Nu. 15 billion allocated for the initiative. However, only Nu. 5 billion—approximately 33.33% of the total allocation—has been disbursed so far, prompting the committee to advocate for immediate action.
The ESP is positioned as a critical tool for boosting Bhutan’s economic recovery through strategic funding and concessional credit. However, the EFC identified significant challenges, including inconsistent SOPs, sectoral exclusions, and loan processing inefficiencies. To enhance the program’s impact, the committee recommended stronger inter-agency coordination, simplified procedures, inclusive sectoral support, risk-sharing mechanisms, and regular monitoring. These measures are essential to ensure that ESP resources are utilized efficiently and focus on activities that generate sustainable economic returns, aligning with Bhutan’s broader developmental goals.
Consultations and Stakeholder Engagement
The Chairperson of the Committee noted that the recommendations were developed after evaluating the ESP’s implementation through a series of structured consultations and meetings with key stakeholders. The Committee consulted with the Royal Monetary Authority (RMA) Governor, the Cabinet Secretariat, and the ESP Secretariat, focusing on governance structures, thematic fund allocation, and specific initiatives.
A follow-up meeting was held with the Finance Minister and the ESP Secretariat to review field-level challenges, streamline SOPs, and discuss progress, including disbursements and proposal approvals. The Committee also met with CEOs of PFIs to review their operational challenges, including issues with documentation, project alignment, and risk mitigation. These discussions informed the recommendations for improved coordination, simplified procedures, and enhanced risk-sharing mechanisms to strengthen the ESP’s efficacy.
The Finance Minister, Lekey Dorji, informed the House that all the recommendations have already been incorporated. Meanwhile, the Speaker instructed the Finance Ministry to review the recommendations thoroughly.
Sangay Rabten from Thimphu
