The remittances sent by Bhutanese workers abroad amounted to USD 17.63 million (M) as of October this year, with Australia consistently emerging as the largest provider of remittances.
The top ten remittance contributors to Bhutan include Australia, Kuwait, the United States (US), Canada, the United Kingdom (UK), Qatar, the United Arab Emirates (UAE), Singapore, Italy, and Bahrain.
Remittances from Australia have demonstrated significant fluctuations, highlighting a pattern of volatility in their contribution to Bhutan’s economy. In August 2023, remittances from Australia were recorded at USD 1.87M, indicating a relatively modest inflow during that period. However, this figure surged dramatically to a peak of USD 19.77M in December 2023, reflecting a seasonal or situational spike, possibly driven by factors such as year-end bonuses, holidays, or financial support from Bhutanese workers abroad during the festive season. After reaching this peak, the remittance flow showed a declining trend, fluctuating over subsequent months before stabilizing at USD 12.05M as of October 2024.
A Thimphu based economist said that while remittances from Australia remain a substantial contribution, the sharp rise and fall illustrate the unpredictable nature of these inflows. “Such volatility could be attributed to several factors, including changes in economic conditions in Australia, variations in employment patterns among the Bhutanese diaspora, exchange rate fluctuations, or shifts in individual financial priorities and commitments,” he said.
He added that the high and inconsistent trend underscores the need for policies to stabilize remittance flows. “Encouraging the use of formal channels, providing incentives, and raising financial literacy among recipients in Bhutan can help harness these inflows more effectively for sustainable economic development. Additionally, understanding the underlying causes of such variability could guide targeted interventions to optimize the impact of remittances on Bhutan’s economy.”
Similarly, Kuwait follows as the second-largest source of remittances, showing a steadier pattern compared to Australia. Contributions peaked at USD 1.64M in December 2023 and remained at the same level as of October 2024.
The US shows a modest and stable trend, with remittances peaking at USD 3.16M in December 2023 and standing at USD 1.63M as of October this year, indicating less volatility.
Canada and the UK have consistently lower remittance amounts. Canada peaked at USD 0.88M in June 2024, and the UK at USD 0.61M in December 2023. As of October, remittances from Canada and the UK were USD 0.52M and USD 0.36M, respectively, suggesting steady but minor contributions.
Qatar and the UAE present similar patterns, with contributions ranging from USD 0.2M to USD 0.4M throughout the year. As of October, remittances from Qatar and the UAE were USD 0.32M and USD 0.28M, respectively.
Other countries such as Singapore, Italy, and Bahrain contribute smaller amounts, with Italy and Bahrain being the lowest contributors, each at USD 0.06M.
Meanwhile, remittances from other countries, including Japan, Bermuda, the Maldives, Switzerland, France, New Zealand, Cyprus, Germany, Ireland, Belgium, Sri Lanka, Denmark, the Netherlands, and Korea, ranged from USD 0.45M to USD 1.2M.
Australia remains the dominant source of remittances for Bhutanese workers abroad, with other countries contributing significantly less. These trends reflect economic conditions, geopolitical factors, and the size of Bhutanese communities in these regions.
According to Sanjeev Mehta, an economist at the Royal Thimphu College (RTC), remittances play a crucial role in Bhutan’s economy by providing financial support to families and communities.
“To maximize the benefits of remittances, policies should focus on improving financial literacy among recipients in Bhutan,” said Mehta. This includes education on saving, investing, and utilizing remittance funds for sustainable development.
Mehta also emphasized the importance of increasing remittance inflows through public awareness of the significance of remittances and the use of formal money transfer channels. “Educating both senders and recipients on the economic benefits could help boost confidence in formal remittance systems,” he added.
Remittances have long been a crucial component of Bhutan’s foreign exchange reserves, playing an essential role in ensuring the country’s financial stability and economic resilience. As a source of convertible currency, remittances help bolster the country’s ability to meet its foreign currency needs, especially for essential imports such as fuel, medicine, machinery, and other goods that are vital for sustaining domestic development and economic activity. This makes remittances not just an important inflow for individual households but also a significant contributor to the nation’s overall economic health.
According to Article 14, Section 7 of Bhutan’s Constitution, the government is required to maintain a foreign currency reserve adequate to cover at least one year’s worth of essential imports. This provision reflects the country’s commitment to ensuring its economic security and protecting against any potential disruptions in the global economy, such as sudden shifts in import prices, supply chain disruptions, or currency exchange fluctuations. By having a sufficient foreign currency reserve, Bhutan can better manage its external obligations and avoid potential crises that could arise from a shortage of foreign currency.
Remittances from Bhutanese workers abroad, especially from countries like Australia, Kuwait, and the United States, play a direct role in strengthening Bhutan’s foreign exchange reserves. These funds, when sent through formal channels, contribute significantly to the national foreign currency pool, allowing the country to maintain a level of financial stability that supports its economic policies and development goals. The consistency and volume of remittances help cushion the economy against external shocks and ensure that Bhutan is equipped to meet its import needs without relying too heavily on external debt or unfavorable borrowing terms.
The growing reliance on remittances also highlights the importance of implementing policies that encourage the formal transfer of funds. Initiatives like the Royal Monetary Authority’s incentive programs for inward remittances play a pivotal role in ensuring that these funds are properly channeled into the economy, providing much-needed stability to Bhutan’s foreign currency reserves. By reinforcing the link between remittances and economic security, the government can continue to build a more resilient and self-sustaining economy.
Sherab Dorji from Thimphu
