The cash incentives on inward remittances has been increased to 10% from 2%
To tackle the country’s decreasing foreign reserves and increase inward remittance inflow, the Royal Monetary Authority (RMA) has implemented an improved incentive program for money sent into the country.
The recently introduced incentive now amounts to 10 %, which is a substantial rise compared to the previous 2 % incentive. The objective behind this decision is to stimulate the flow of remittances, enhance the nation’s foreign currency reserves, and encourage domestic savings and investments
According to a press release issued by the RMA earlier today, the 2 % incentive scheme, which had been in effect since May 2021, has been revised and increased to 10 %. The move comes as a recognition of the substantial contributions made by the incentive scheme in facilitating remittance inflows and enhancing the country’s foreign currency reserves. The scheme has also played a vital role in encouraging saving and investment among Bhutanese residing abroad.
Additionally, the enhanced incentive will continue to be exclusively available to Bhutanese individuals living and working overseas.
“It aims to offset transaction costs associated with remitting money to personal accounts or family members in Bhutan. The RMA found that the monetary incentive not only encourages increased number of inward remittances but also ensures that the remittances are received through formal channels,” states the press release.
Meanwhile, the incentive scheme initially began in 2021 with a 1% incentive on inward remittances for Bhutanese individuals residing, working, or studying abroad. This measure aimed to offset transaction costs and facilitate the transfer of funds to personal accounts or family members in Bhutan.
Subsequently, in July 2022, the incentive was increased to 2 % from 1 %, with an extension until December 30th of the same year.
Additionally, on February 16, 2023, RMA announced the further extension of the 2% incentive scheme until December 30, 2023. The scheme is applicable to inward remittances received from January 1 of this year. Under this initiative, beneficiaries are eligible to receive a 2 % cash incentive upon converting their remitted amount into Ngultrum, the national currency, using prevailing exchange rates through banking channels and international money operators.
To facilitate the enhanced incentive amount, commercial banks and money transfer operators will play a crucial role. The additional 10 percent incentive will be provided as an additional value on the prevailing exchange rate received by non-resident Bhutanese at the time of converting their remittances into Ngultrum, as stated in the press release.
However, the incentive will not be applicable to remittances received for foreign direct investments, donations, and trade, including those received in favor of non-governmental organizations, civil society organizations, and companies.
The effectiveness of the cash incentives introduced by the RMA is evident in the figures of inward remittances received in the first two months of this year.
According to the RMA’s monthly statistics report, the country received a remittance of Nu 1,201.19 million (mn) during the months of January and February. This represents a substantial increase of Nu 593.06 million (USD 6.38 million) compared to the same period last year.
The surge in remittance inflow can be attributed to the RMA’s efforts to improve remittance information and services for Bhutanese residing overseas. The revamped incentive scheme is expected to further stimulate remittance inflows and bolster the country’s foreign reserves.
Tshering Pelden from Thimpu