Banks and private sector yet to come to consensus over monetary measures

Foreign Reserves in October stood at USD 464.44mn

The total reserve of October is a decrease of almost Nu 332.96mn compared to the same period last year

Bhutan’s foreign reserve has reached USD 464.66 million (mn) as of October 2023, an astounding slump from the figures in the same period last year.

According to the monthly statistical bulletin released by the Royal Monetary Authority (RMA) of Bhutan, the foreign reserve has been decreasing from the month of June to October 2023. In the month of June this year, the foreign reserve stood at USD 532.23mn, however in the month of July and August, the foreign reserve has decreased and stood at USD 472.40mn and USD 468.41mn respectively.

Similarly, in September and October month this year, the foreign reserve has further decreased and stood at USD 467.05mn and USD 464.66mn each.

In October 2022, the total external reserves stood at USD 797.62mn, which gradually decreased to USD 508.02mn by September 2023. Notably, the drop from March 2023 to May 2023, where reserves decreased from USD 690.57mn to USD 549.08mn, while there was also a marginal decrease to USD 505.60mn in October 2023.

To save the dwindling foreign reserves, the government in consultation with the RMA implemented several policy interventions, such as moratorium on selected vehicle imports, amongst others.   .

These adjustments aim to align with the constitutional mandate that dictates the necessity of maintaining foreign reserves adequate enough to cover 12 months of essential imports.

In an effort to maintain a minimum foreign currency reserve sufficient to cover essential imports for a period of 12 months, the Ministry of Finance (MoF) issued a notification on August 16th. The notification from the MoF stated that the extension of the moratorium on vehicle imports is for an additional six months from August 18, 2023, to February 17, 2024.

In addition, to address this alarming trend, the government has revised the essential import value, which is the amount needed to meet 12 months of essential goods imports. The Cabinet endorsed the revision on February 13, 2023, based on recommendations from an independent review committee. The revised essential import value for 2023 during normal periods is set at USD 603mn, with a reduced amount of USD 464mn during critical periods.

Similarly, there are also various measures endorsed in the 13th five year plan, such as investment in the green bond. The green bond is a special-backed security to encourage foreign remittances and investment, wherein the Bhutanese sending money from abroad could benefit from the coupon rate of the bond. The green bond is considered very secure as it is backed by the sovereign guarantee of the government.

Foreign exchange reserves are assets denominated in a foreign currency that are held by a nation’s central bank. These may include foreign currencies, bonds, treasury bills, and other government securities. The main reason for the declining foreign reserve of the country is due to soaring import bills and appreciating USD against the Ngultrum.

Meanwhile, as per rough calculations, Bhutan has to spend more than USD 50mn to import commodities monthly, during the normal periods when the 12 months of essential is worth of USD 603mn.

Sherab Dorji from Thimphu