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

June remittances drop by Nu 169mn

The volume of remittances is also 1.7% lower compared to the Nu 577mn seen in the same month last year

The total US Dollar remittances to Bhutan dropped to USD 5.3mn in June this year.

Data from the Royal Monetary Authority (RMA) showed that cash remittances that coursed through banks from different parts of the world to Bhutan dropped to Nu 407mn in June. This is one of the lowest volumes of monthly remittances for 2022.

The June volume of remittances is also 1.7% lower compared to the Nu 577mn seen in the same month last year. This is also the lowest monthly growth rate for the year.

In the view of local economists in the country, one of the main reasons overseas Bhutanese were prompted to send more money during the month, apart from the return to normalcy of the global economy is concern over the rising prices of goods and commodities.

In June, domestic inflation hit 6.61% as the majority of commodity groups registered inflation rates. Food and energy-related items were the key drivers, while transport inflation also continued to rise due to higher fuel prices.

The June remittance decrease resulted in the withering of the cumulative cash remittances around by 2% to Nu 2.8bn in the first half of 2022, from Nu 4bn recorded in the comparable period in 2021.

However, the figures compiled by the RMA were extracted from the four commercial banks and exclude other channels like the Western Union money transfer and other informal means.

The inward remittance of the Australian Dollar (AUD) has dropped from AUD 4.64mn in 2021 and AUD 2.55mn as of June this year.

Of the total inward remittance received through the formal channels, about 60% was from Australia. The remittance from the US and the Middle East constituted about 30% and 10% respectively.

The inward remittance contributed to more than half of the total remittances, with about Nu 208mn (USD 2.67mn), followed by Nu 134mn (AUD 2.55mn) in 2021 as of June. There were 3.5 times more AUD remittances in three consecutive months of March than in 2020.

Further, remittances in denominations such as Pounds Sterling, Euro, and other European currencies roughly equated to Nu 53.12mn as of June this year.

The exchange rate of the Dollar against the Ngultrum increased slightly to Nu 80.80 in March this year and was Nu 75 for the fiscal year average (2021-2022).

Meanwhile, the inflow remittance helps in building foreign exchange reserves.

In an earlier interview with the economic affairs minister, Loknath Sharma said remittance is beneficial right now and it received its desired spot of respect in the economy when the country lost its dollar-earning capacity.

“Remittance has a positive and powerful impact on the professionals working outside and contributing to the economy,” Lyonpo said adding it is not only Bhutan, most neighboring countries have a very good source of remittances flowing into their economy increasingly.

Lyonpo said remittance has also helped inject liquidity into the economy and we must be able to produce a relevant skilled, and highly adaptable workforce if remittance is to increase as the global market might demand new skills.

However, some experts said remittance is an important source of foreign exchange earnings for many countries and it helps to reduce the deficit in the current account.

The local economist said that at the micro-level, remittance received by the family members helps boost household consumption, strengthens the resilience of the poorer households, and improves their living standards.

Additionally, remittance would improve the distribution of income, and promote social mobility in long run, they said.

“It is unlikely that international migration is on rising. Such migration helps to ease the pressure of unemployment and balance of payment in the country.

“Remittances are expected to seasonally increase in the third-fourth quarter, in preparation for the holiday season and spending, a pattern seen in recent years,” he said.

Kinley Yonten from Thimphu