Bhutan received approximately Nu 11.7bn remittance in 2020
Remittance is a boon right now and it received its desired spot of respect in the economy when the country lost its dollar-earning capacity, said Economic Affairs Minister Loknath Sharma.
The Royal Monetary Authority (RMA) reports that Bhutan received a total of US$ 159.24mn; approximately Nu 11.7bn remittance in 2020. This is an increase of 12.57% compared to 2019: 80% was from Australia, 10% from the US and 2.5% from the Middle East.
The Lyonpo said remittance has a positive and powerful impact on the professionals working outside and contributing to the economy.
Additionally, he said it is not only Bhutan; most neighboring countries have a very good source of remittances flowing into their economy increasingly.
“It has also helped inject liquidity in the economy and we must be able to produce relevant, skilled, and highly adaptable workforce if remittance is to increase as the global market might demand new skills,” said Lyonpo.
However, Lyonpo said it would be difficult to predict whether Bhutan can continue to accrue remittance in the future as the workforce is small and now it faces new public health challenges.
Professor in Economics at the Royal Thimphu College, Sanjeev Mehta said remittance is an important source of foreign exchange earnings for many countries and it helps to reduce the deficit in the current account.
He said that at the micro-level, remittance received by the family members helps boost household consumption, strengthens resilience of the poorer households, and improves their living standard.
Additionally, remittance would improve the distribution of income, and promote social mobility in long run, said Sanjeev Mehta.
“Due to pandemic-related recession and job losses, remittances are likely to decline significantly and it is unlikely to return to its peak value in the next few years,” said Sanjeev Mehta.
Additionally, he said revenue from tourism is also going to face a similar fate, while revenue from the export of hydropower is likely to remain a stable and dependable source of income.
“On a realistic note, it is unlikely that international migration will rise in near future. Theoretically, such migration helps to ease the pressure of unemployment and balance of payment,” said Sanjeev Mehta.
Lyonpo said that despite the perks of remittance, one of the impacts of Bhutanese moving overseas is the loss of active and productive groups that could fuel the economy of the country or enhance the skill base.
“We will also miss the opportunity to trap the advantage of demographic dividend as two to three decades from now, we will be having the most active and energetic workforce,” said Lyonpo.
According to the Asian Development Bank’s report ‘The Demographic Dividend in Bhutan: Taking Advantage of Transition,’ Bhutan’s first demographic dividend phase started after 1995 and is expected to last until 2038.
It states the demographic dividend peaked in 2013 and is expected to last for 43 years and the dividend is expected to steadily decline and turn into demographic tax after 2038.
“In Bhutan’s 43-year demographic dividend phase demographic dividend could have attributed an estimated 1.6 percentage points to economic growth each year,” the report states.
Moreover, Lyonpo said Bhutan can improve remittance inflow in the country by improving banking linkage or channels and online money transfer platforms.
Similarly, Sanjeev Mehta said that in order to improve remittance flow, the country can initiate measures like working on the quality of education, skills development, tax rebates on remittances, ease the international movement of people, improve work culture, and develop diplomatic relationships with other countries.
Thukten Zangpo from Thimphu