Expressing concerns regarding the implementation of the Economic Stimulus Plan (ESP), the Prime Minister (PM) Dasho Tshering Tobgay said that the programme did not go according to their plan and aspirations.
Answering queries from journalists during the monthly meet-the-press on Friday, PM said that the ESP is designed to provide essential financial support with benefits such as no collateral requirements and attractive low interest rate of 4%. However, they are confronting challenges in implementing the ESP which is primarily aimed to help recover the economy by enhancing domestic production in selected sectors.
The participating financial institutions (FIs), according to the PM, are worried about clients not paying back the loans due to absence of collaterals and mortgages. “FIs are worried about who will bear the loss in such a situation,” he said. Nonetheless, the PM said that the government is in discussion with FIs to resolve the issue together.
The PM shared that the government of the day had faced similar confrontation during its first tenure while implementing the ESP of Nu 5 billion and for this program too, the government is countering impediments. Having learnt from the past experiences, the government has entrusted financial institutions with full responsibility for implementing the ESP, including the allocation of funds.
However, the PM said, “The financial institutions have their own shared challenges in adhering to their own regulations and the situation is not progressing as we had hoped.”
On October 9, the PM called on all the financial institution’s chief executive officers and directed them to support those applicants struggling to complete loan applications and to expedite the disbursement process. The PM noted that the government is aware of the inconveniences related to loan applications and is prepared to take responsibility to resolve these issues.
He highlighted the importance of the ESP for local communities, stating, “Most of the applications come from the community, and we need to provide them support differently.” Lyonchhoen mentioned that Bhutan Development Bank Limited (BDBL) being the most relevant bank for the community, they are going to provide them full support if BDBL could provide assistance to the community on a contract basis.
Additionally, the PM shared that the role of the community center has now been transferred to the local government, and those who have been working in these centers will be trained to facilitate ESP implementation.
Lyonchen also stated that as of now, most of the financial institutions have reached their lending thresholds and are unable to provide loans for construction. “To address the issue, during the 11th FYP, we started a subordinated debt program—a minimum loan provided to financial institutions by the government. With this subordinated debt, financial institutions could increase their liquidity, enabling them to offer support for loans to others,” the PM said, adding that they are looking for possibility of implementing subordinated debt.
The PM assured that with all these strategies, they expect to see results as soon as possible and committed to address all the issue. “We might face problems as we are in the initial stages of implementing ESP, but we are committed to addressing these issues during the implementation process.”
Meanwhile, according to Chencho Tshering, the chief planning officer at Finance Ministry, as of 8 October, 2024, a total of 193 applications were received by the participating financial institutions. “Of this, 12 projects have been approved and sanctioned a total of Nu 8.3 million. Remaining applications are being assessed by the financial institutions. Of the total application, 148 are related to the primary agriculture and livestock while 47 are in the production and manufacturing sector.”
The chief planning officer said that any type of construction businesses is not eligible for concessional loans. However, the sector (except housing) is eligible under reinvigoration fund of 4% interest subsidy. Similarly, new startups are not eligible for concessional loans except existing startups planning to scale up. From the application records received from the financial institutions, it shows that no application has been received from the existing startups for scale up. However, financial institutions have informed us that a few startups have approached them enquiring about loans for scale up.
Some of the challenges faced by the financial institutions during the early stage of implementation are largely related to confusions among the public with the application process and eligibility criteria. The ESP Secretariat in close coordination with the RMA and the financial institutions have been conducting question and answer sessions on ESP loan application process with Gups, Tshogpas, GAOs, DPOs, Community Center Operators, and 1199 call center representatives. Further, communication materials are also developed and shared through BBS, radio and social media explaining the application process.
By Nidup Lhamo, Thimphu
