Bhutan witnessed a huge surge in the import of construction materials during the first quarter of 2023, as reported by the Department of Revenue and Customs (DRC). The nation’s import bill for construction materials skyrocketed to an astounding Nu 21.26 billion (bn) in this period, indicating a significant increase of approximately 43.6% compared to the same quarter in the previous year. This indicates that the moratorium imposed on commercial housing and hotel construction on June 8, 2023 came at the right time.
In contrast, during the corresponding period in 2022, Bhutan had imported construction materials worth Nu 14.8 bn. This considerable upswing in imports underscores the rising demand for construction materials within the country.
However, recent developments, such as the moratorium imposed on commercial housing and hotel construction on June 8, 2023, are expected to reverse this trend. The imposition of the moratorium is anticipated to lead to a decrease in the import of construction materials, which could help improve Bhutan’s depleting foreign reserves.
Meanwhile, the Prime Minister has emphasized that the decline in foreign reserves is directly linked to increased imports of commodities purchased in foreign currencies. Therefore, the reduction in construction material imports is expected to contribute positively to the restoration of the country’s foreign reserves.
Data also reveals that Bhutan’s construction material imports from India witnessed a significant increase, with over 75% of the materials being imported from its neighboring country. In comparison to the same period the previous year, the import of construction materials from India saw a substantial rise of 81%.
Meanwhile, imports of construction materials from countries other than India have decreased by 16% in this year’s first quarter compared to the same period the previous year. During the first quarter of 2023, construction materials worth Nu 4.7 bn were imported from countries other than India, while the figure for the same period last year was Nu 5.6 bn.
The range of construction materials imported by Bhutan includes mineral products, products of the chemical or allied industries, wood and articles of wood, textiles and textile articles, articles of stone, plaster, cement, asbestos, mica, or similar materials, ceramic products, glass and glassware, base metals and articles of base metal, machinery and mechanical appliances, electrical equipment, parts thereof, sound recorders and reproducers, television image and sound recorders and reproducers, and parts and accessories of such articles.
A breakdown of the construction material imports during the first quarter of 2023 reveals that Bhutan imported mineral products worth Nu 5.68 bn, products of chemical or allied industries worth Nu 1.84 bn, wood and articles of wood worth Nu 1.17 bn, textiles worth Nu 643 million (0.6 bn), stone, plaster, and cement worth Nu 766 mn (0.6 bn), base metals worth Nu 3.10 bn, and machinery worth Nu 6.72 bn.
Among all the construction materials, some materials such as mineral products, plastic, and base metals have witnessed a drastic increase in import this year compared to the same period last year. In the last three months of 2023, the country imported base metals worth Nu 5.6 bn, representing a 43% increase compared to the same period the previous year when it imported Nu 3.9 bn worth of base metals. Additionally, imports of plastic and rubber also experienced a staggering increase of 73% during the first quarter of this year, amounting to Nu 1.3 bn, in contrast to Nu 0.75 bn worth of plastic and rubber imports during the initial three months of 2022.
As Bhutan continues to monitor its total reserves, the import value of construction materials for the first three months of 2023 suggests that the loan moratorium on commercial housing and hotel construction has been timely, potentially saving a considerable amount of the total reserve. As of March 2023, the country’s total reserve stands at USD 698.3 million, according to the Royal Monetary Authority’s (RMA) monthly report, which is adequate to meet 13.9 months of essential imports. The constitutional mandate requires the minimum total reserve to be sufficient for at least 12 months of essential imports.
To improve the total reserve, the government has taken various initiatives, including the imposition of a moratorium on vehicle imports, revised requirements for the minimum reserve, and increased cash incentives on inward remittances from 2% to 10%. However, if the total reserve does not show improvement, the government may consider imposing a ban on non-essential items. Last year, in response to decreasing foreign reserves, the government prepared a non-essential items list, which included items like pasta, sweet biscuits, noodles, waffles, cakes, puffed rice, bread, corn flakes, processed meat, processed cheese and honey, cigarettes containing tobacco, furniture, television sets, pan masala, tea bags, etc., as they accounted for a total import worth Nu 7.9 bn in 2021.
Additionally, the government identified the top 10 imports that have a direct impact on the reserve, including diesel, aircraft, wood charcoal, PC’s central processing unit, coal, rice, motor spirit, iron and steel, telephone sets and towers, and vegetable oil. These ten imports cost Nu 90.2 bn in 2022 and Nu 66.6 bn in 2021.
Tshering Pelden from Thimphu