Government plans to roll-out 13th FYP budget and ESP to achieve 8% economic growth

The government aims to achieve an economic growth target of 8% through the rollout of the 13th Five Year Plan (FYP) budget and the Economic Stimulus Plan (ESP). This increase in economic growth by 2% from the current growth rate hovering around 6% is mandated towards resurrecting the different sectors which lay dormant due to the pandemic, causing alarming Non-Performing Loans (NPL).

During the 9th meet-the-press on Friday, finance secretary, Leki Wangmo shared that the NPL in the trade and commerce sector stand at approximately 7%, primarily due to challenges faced by the pandemic. This is primarily driven by NPL by the commodities and groceries as during Covid, micro-businesses and small business licenses have had to be cancelled, which in turn resulted in shutting down majority of businesses.

“Another sub-sector area is the hardware and construction sector which is still lagging behind if we still recall, until recently when the moratorium on housing and construction loan was lifted. Although we have rolled out the 13th FYP budget, we couldn’t fully roll it out due to limitations in certain sectors.”

Further, the NPL is 1% in the tourism sector and 2.3% in the housing sector, according to the secretary. “We are aware that most of the loans under this sector are still in deferment period because we believe that these sectors still have a lot of catching up to do in the economic growth,” she said, adding that NPLs at one and two percent is considered frictional and not a major concern thereby.

As an intervention, as an immediate measure, RMA as a regulatory body had issued a rule and regulation on loan restructuring to the financial service provider, so as to provide an immediate relief to businesses. “If you believe that your business has potential to perform in the long term but if the immediate period is impacted by other frictions in the economy, then what this allows is it gives opportunity for businesses to restructure their loan,” she said, adding that by restructuring the loan, if a business feels that it won’t be able to pay the loans in 5 years’ period, they have the opportunity to extend to 7 or 10 years, in line with the regulatory issued by RMA. There are also rules and regulation on foreclosure and write-off of NPL, the secretary said.

Eventually, if there are proofs that this loans cannot be provided and loans needed to be returned, there is a framework issued by RMA that allows financial service providers to close off this loans.

“We are still recovering from the impact of Covid. So, on the part of government, our plan is to rollout the 13th FYP budget and the ESP in the most efficient and effective manner so that the targeted economic growth rate could be achieved.”

She said that if this growth is achieved, it’s sure to have a trickledown effect on the economy.  “To achieve that, it is the responsibility of the individual. This is how our economy will revive back, and in the medium to long term, consumer sectors like retail, trade, commerce can eventually benefit from it.”

Meanwhile, the finance secretary exclaimed that it is not just the responsibility of the government to address the issues arising out of NPLs. She implored that individuals and businesses alike should take the responsibility as well.

By Nidup Lhamo, Thimphu