Bhutan’s foreign reserves are projected to reach USD 1.112 billion by the end of Fiscal Year 2025-26, according to the Ministry of Finance’s latest Macroeconomic Situation Report. The figure represents a significant strengthening of the country’s external position compared to 2024, with reserves now sufficient to cover nearly 29 months of essential imports, which is well above the international benchmark of three months.
The ministry, however, cautioned that sustainability will depend heavily on export performance and prudent management of external borrowing. “Bhutan’s external position is manageable but remains reliant on external sources of funds,” the report noted.
The trajectory of Bhutan’s reserves over the past two years illustrates both volatility and resilience. In 2024, reserves saw moderate fluctuations, while in 2025, the upward momentum has been unmistakable. In January 2024, it was USD 602.7 million; and in January 2025, USD 853.7 million
This represents a jump of over USD 250 million year-on-year. The positive trend continued into February and March 2025, when reserves climbed to USD 860.9 million and USD 886.9 million respectively, the highest levels recorded so far this year.
In contrast, 2024 told a more uneven story. After peaking at USD 699.6 million in March, reserves dipped to USD 596.9 million by May. The fluctuations were attributed to global economic headwinds and domestic policy adjustments.
The composition of reserves in 2025 reflects stability across key components. Foreign currency reserves rose from USD 814 million in January to USD 846.8 million in March, before easing to USD 774.5 million in May—still significantly higher than in 2024. Special Drawing Rights (SDR) holdings remained relatively stable between USD 33–35.5 million. The IMF reserve tranche position was held steady at just under USD 7 million.
The Finance Ministry attributed the stronger reserve position to a combination of improved trade balances, higher foreign investment inflows, and effective macroeconomic policies implemented over the past year. A narrowing trade deficit, supported by stronger exports and relatively stable import levels, has helped ease pressure on reserves.
One of the most significant drivers has been the hydropower sector, which continues to serve as Bhutan’s economic backbone. Revenue from electricity exports to India rose more than expected in early 2025, supported by favorable rainfall and operational efficiency in major hydropower plants. Analysts note that these inflows provided a steady stream of foreign currency earnings, directly strengthening Bhutan’s external reserves.
At the same time, FDI inflows have picked up after a period of sluggish growth during the pandemic years. Investor confidence has been buoyed by ongoing reforms in Bhutan’s business environment, including regulatory simplifications and targeted incentives for sectors such as renewable energy, tourism, and agro-based industries. “Reserves are benefiting not only from hydro exports but also from early signs of diversification in investment inflows,” said one Thimphu-based financial analyst.
Policy measures have also played a role. The Ministry of Finance and the Royal Monetary Authority (RMA) have worked in tandem to tighten external borrowing, manage foreign exchange outflows more efficiently, and encourage repatriation of earnings. Prudent fiscal management, coupled with a cautious approach to external debt, has provided additional stability.
Foreign reserves are more than just numbers on a balance sheet. For Bhutan, they are a cornerstone of economic resilience. They act as a buffer against external shocks such as rising fuel prices or global financial instability. They help stabilize the ngultrum, which is pegged to the Indian rupee. They boost investor confidence, signaling that the country can meet its external obligations.
With reserves projected to surpass the USD 1.1 billion mark by the end of FY 2025-26, Bhutan is better positioned to manage external risks. Still, policymakers are mindful of global uncertainties that could affect future inflows, from commodity price swings to slowing demand in key markets.
The ministry underscored the importance of maintaining momentum. “Higher and more stable reserves suggest Bhutan is on a path of recovery and growth,” the report said. But it also warned that the country must continue to focus on export diversification, foreign investment, and fiscal discipline to safeguard against downturns.
For now, the trend is encouraging: from volatile reserves in 2024 to a steadily strengthening external position in 2025, Bhutan’s foreign exchange outlook is showing signs of resilience. If sustained, this trajectory could help underpin stronger economic confidence as the nation moves into FY 2025-26 and beyond.
Sherab Dorji from Thimphu
