Moratorium on vehicle imports extended yet again
In response to the ongoing challenges faced by vehicle dealers in the country following the ban on vehicle imports, the government has taken steps to provide relief measures to authorized vehicle dealers. This move aims to alleviate adverse effects of the import moratorium and sustain business operations. However, vehicle dealers say the relief measures would provide temporary respite.
The government’s decision was communicated through a recent notification that also announced an extension of the moratorium for an additional six months. To address the challenges faced by authorized vehicle dealers, the government, in consultation with the Royal Monetary Authority (RMA), has outlined two significant relief measures. The first involves deferring loan repayments for authorized vehicle dealers until the moratorium is lifted. This move aims to ease the financial burden on these businesses during the period of restricted imports.
The second relief measure focuses on providing soft working capital to authorized vehicle dealers at a concessional rate of interest. This financial support is intended to cover operational expenses and help dealers maintain their business operations despite the import restrictions.
Meanwhile, the General Manager of Bhutan Hyundai Motors, an authorized vehicle dealer in Thimphu, said the relief measures provided by the government will be beneficial, especially to those vehicle dealers who are operating on loans and overdrafts. However, he added that these measures will provide breathing space for now and that in the end, it all comes down to sustainability.
“Deferring means pushing back the loans and interest, but eventually, it will accumulate, potentially leading to a significant amount to be dealt with later. If the business does not pick up even after the lifting of the moratorium, it could result in future difficulties,” he said.
Additionally, the Chief Executive Officer (CEO) of the State Trading Corporation of Bhutan stated, “Yes, the moratorium has significantly affected our business. However, we are striving to sustain ourselves through other ventures, as we understand the government’s situation regarding the forex reserve.”
He also emphasized that the proposed relief measures would benefit the dealers. Nevertheless, he said that offering soft working capital to authorized vehicle dealers at a concessional rate of interest would be particularly advantageous if the same concessional rate of interest were extended to other business activities in which the dealers are currently engaged, such as temporary measures to ensure their sustainability. For instance, STCBL (State Trading Corporation of Bhutan Ltd.) is involved in the petroleum business, which is instrumental in keeping the company afloat. If the concessional rate of interest were applicable to this aspect of the business, it would aid the dealers in maintaining their operations.
“Conversely, if the concessional rate of interest is exclusively applicable to vehicle purchases, it would be of no benefit, as we are not engaged in buying or importing vehicles at the moment,” he added.
The initial ban on vehicle imports was enforced on August 18, 2022, with an expected end date of December 2022. However, due to persisting economic concerns, this restriction was extended until August 2023. And now, the Ministry of Finance (MoF) has confirmed that the moratorium will remain in effect until February 17, 2024.
Meanwhile, the notification highlighted that the moratorium on vehicle imports was a response to Bhutan’s declining foreign reserves. The country’s foreign reserves plummeted from 839.6 million USD (equivalent to 15.08 months of essential imports) in June 2022 to 772.3 million USD (equivalent to 13.87 months of essential imports) in July 2022. This abrupt decline of 67.3 million USD in just a month prompted the government to take measures to safeguard the economy.
In 2021, Bhutan imported a total of 4,032 passenger cars, amounting to Nu 2.6 billion (bn). Out of these, 3,849 vehicles, valued at Nu 2.15 billion, were imported from neighboring India, while 183 vehicles, costing Nu 449.33 million, were sourced from other nations.
Tshering Pelden from Thimphu