RMA and Govt. strategize speedy return to new economic normal

The RMA has prepared a Ten-Year (2021-2030) Strategic Plan called the Druk Nguldrel-Lamtoen 2030

With the government requiring a higher level of investment to promote greater economic stability and output growth, and the pandemic rages continuing unabatedly, the Royal Monetary Authority (RMA) together with the government has been strategizing a speedy return to the new economic normal. 

For this, according to RMA’s Governor Dasho Penjore, they hope to do this by intensifying the implementation of growth and employment-oriented capital projects and initiating resilience measures to counter uncertainties in the future.

“With this sense of optimism and new impetus from additional investment in public and private sectors and hydropower projects which are expected to expedite major capital works, the GDP growth is expected to bounce back and stabilize at an average of 5.4% annually in the next three years,” Dasho Penjore said.

 He added that the overall unemployment rate is also expected to reduce to 4.7%. “Inflationary pressures are expected to remain checked this year but will gradually start picking up from 2022 as the demand conditions improve.”

 According to the Governor, as the backbone of the economy, the financial sector assumes greater responsibility to support the economy during these difficult times.

 “The RMA as the premier institution remains committed to working closely with the government to combat the pandemic and support the economic recovery in the medium term,” he said.

However, to complement the ongoing economic recovery efforts, the RMA is working on several projects to help realize the country’s goals of economic transformation in the 21st century.

Governor Dasho Penjore stated that the RMA has prepared a Ten-Year (2021-2030) Strategic Plan—Druk Nguldrel-Lamtoen 2030—geared towards transforming and positioning the financial sector as the key catalyst for Bhutan’s economic growth and prosperity.

The Druk Nguldrel-Lamtoen is a roadmap for the RMA to respond to the changing demands of an economy that will be increasingly driven by technology and innovation.

According to the Governor, the key thrust areas of Druk Nguldrel-Lamtoen are promoting a resilient, sustainable, and inclusive growth; reinforcing stability, resilience, and integrity in the financial sector; transforming payment system for the new digital age; and leveraging digital technology and innovation.

He said that in the first year of the implementation of the roadmap, the RMA initiated several projects that included the piloting of the Central Bank Digital Currency and the establishment of a robust Data Warehouse.

Further, to promote efficiency and innovation in the financial sector, the RMA is exploring a digital alternative to the Ngultrum. “This will also help drive the current payments infrastructure built on blockchain technology,” the Governor stated.

In addition, the RMA is in the process of revamping the traditional practice of data and information management by switching over to a state-of-the-art Data Warehouse and Analytics System.

According to Governor Dasho Penjore, technology and big data have become a new catalyst for both economic transformations as well as disruption.

“If carefully embraced, such initiatives will be a lynchpin to modernize the existing landscape of the financial sector and macroeconomic policy decision-making process.” 

He added that as the RMA strives to embrace emerging digital technology in a calibrated mode, these flagship projects will not only strengthen the existing capabilities in undertaking the core central banking function but will also promote greater automation, thereby improving the existing policy decision-making process.

The Governor also stated that in terms of the financial sector stability, the existing stress testing affirms that the banks remain resilient to liquidity issues with a comfortable level of a capital buffer to absorb anticipated credit losses post-June 2022.

Meanwhile, the RMA will continue to strengthen and follow a risk-based approach to financial supervision to ensure that the financial system remains stable and continues to support the national economic recovery process.

To further strengthen the resilience of the financial sector, the RMA is formulating a Non-performing Loans (NPLs) Management Strategy to address post-Covid-19 NPLs, Guidelines on Loan Origination and Monitoring, framework on an early warning system, and property valuation and crisis management framework along with strengthening of the existing corporate governance practices.

The RMA is also closely monitoring the vulnerabilities that may emerge from deteriorating credit quality on loans exposed to pandemic-affected sectors.

The Governor stated that as the country navigates through the pandemic, the RMA will continue to keep vigilance on the development in the financial sector and macroeconomic conditions and make necessary interventions in close collaboration with financial institutions and other important stakeholders.  “I am confident that with the wisdom and guidance of His Majesty The Druk Gyalpo, the country will successfully overcome the current and future challenges so that we can collectively pave a way forward to build an inclusive and resilient post-Covid-19 economy,” he added.

Kinley Yonten from Thimphu