Bhutan’s fiscal landscape is witnessing a remarkable turnaround within the Ministry of Finance (MoF) reporting that the country’s fiscal deficit has been successfully reduced to 4.4% of GDP in the first quarter of FY2025–26—well below the budgeted 6.2%. This significant achievement has been attributed to strengthened revenue mobilization, strategic expenditure rationalization, and a steadfast commitment to prudent fiscal management.
According to the Ministry, the improved fiscal position reflects Bhutan’s dedication to macroeconomic stability, efficient resource allocation, and evidence-based policy implementation. It signals a disciplined approach that balances fiscal prudence with developmental priorities, ensuring the nation’s long-term economic resilience.
The reduction comes amid earlier recommendations from the Economic and Finance Committee (EFC) of the National Assembly, which had urged the government to keep the deficit at 5% of GDP or below. The committee’s concerns were rooted in the potential risks of elevated deficits, including inflationary pressures, declining liquidity, and constrained borrowing space for the private sector. As of March 31, 2025, liquidity for FY2024–25 was estimated at Nu 11,247.4 million (M) and projected to decline to Nu 7,224.4M in FY2025–26.
While the National Assembly did not formally adopt the EFC’s recommendation, the MoF’s first-quarter results reveal a trajectory that surpasses expectations. Internal resources have increased from the approved Nu 72,357.40M to Nu 76,508.82M—a substantial boost of Nu 4,151.42M. This increase has directly contributed to reducing the fiscal deficit from 6.2% to 4.4%, providing the government with greater fiscal space to pursue strategic initiatives without jeopardizing economic stability.
Among the key initiatives driving fiscal efficiency are large-scale agricultural transformation projects, aimed at boosting food security, high-value crop production, and rural employment. Notably, two commercial Chirub farms are being developed in Samdrupjongkhar, while two mega strawberry commercial farms are underway in Paro and Wangduephodrang.
The Chirub farms, located in Samrang (39.39 acres) and Pemathang (60.15 acres), are being established under GoI PTA funding with a total investment of Nu 242.21M. These farms will cultivate a wide variety of crops, including chili, tomato, onion, cole crops, and fruit trees, employing modern agricultural technologies such as protected cultivation structures, automated irrigation, mulching, mechanization, fencing, and digital monitoring tools. Expected to produce approximately 575 metric tons of key vegetables and fruits annually, these farms will create meaningful employment opportunities for local youth, including De-suups deployed from Pemathang and Tashithang Gewogs.
To ensure long-term sustainability, the Department of Agriculture (DoA) has established the farms as turnkey projects, after which full management will be handed over to De-suung. Collectively operating under the Chirub Farms brand, these initiatives align with the 13th Five-Year Plan’s GDP targets for the agriculture sector, contributing to an expected increase in output from Nu 31 billion to Nu 50 billion.
Meanwhile, the strawberry farms, funded by both the EU and the Bhutanese government, span Thimphu, Paro, Wangdue, Haa, Punakha, and Bumthang. Originally targeting only Thimphu and Paro, crop suitability assessments prompted an expansion to additional dzongkhags. Ten farmers expressed interest in adopting commercial-scale greenhouses, with seven committing to semi-automated greenhouses under a 30% cost-sharing arrangement. Funds cover infrastructure, smart irrigation, strawberry runners, machinery, and training programs, ensuring sustainable and profitable production.
The budget also includes a general reserve allocation of Nu 4,312.5M, accounting for 3.1% of the total budget. The MoF has clarified that all expenditures from this reserve are strictly governed by the General Reserve Guidelines 2022, ensuring funds are used solely for purposes specified in the Budget Appropriation Act, with approval required from the Lhengye Zhungtshog and oversight by the Royal Audit Authority.
Key allocations, including Nu 263M for the Rural Life Insurance Scheme and Nu 31.5M for the Third Child Policy, will be managed through multi-sectoral steering committees to ensure data-driven, transparent, and equitable implementation. The Third Child Incentive Program (TCIP) is scheduled to begin disbursing benefits from 5 February 2026.
Centrally executed capital programs, totaling Nu 11,321.4M, continue to support local governments in projects requiring technical expertise, including hospitals, schools, major roads, and education infrastructure. While the EFC recommended direct transfers to local governments, the MoF maintains that central management ensures quality, efficiency, and compliance with sector-specific standards, while allowing capacity-building at the local level.
To strengthen government operations, Nu 343.7M has been allocated for international internet bandwidth under the World Bank-funded ACCESS project, securing reliable connectivity via Airtel, Tata, Bhutan Telecom, and Tashicell.
With the first-quarter deficit already slashed to 4.4%, Bhutan’s government has signaled a continued commitment to monitoring liquidity, inflation, and borrowing space, ensuring that fiscal policies remain aligned with broader economic goals. The disciplined approach reflects a bold, forward-looking strategy that balances fiscal prudence with transformative investments, laying the foundation for sustainable growth and long-term prosperity.
Nidup Lhamo
From Thimphu
