The 2021-2022 FY saw a significant rise in merchandise imports amounting to Nu 104.1bn
At Nu 45.2bn, Bhutan’s trade deficient during the 2021-2022 fiscal year (FY) accounted for 23.5% of Gross Domestic Product (GDP), which was an increase by more than three folds from the previous year.
The above has been highlighted in the Royal Monetary Authority’s (RMA) annual report 2022, which states that a significant rise in merchandise imports by almost 58.9% amounting to Nu 104.1bn from Nu 65.5bn in the previous year resulted in the high trade deficit.
The report further mentions that merchandise import, comprising of commodities such as base metals including iron and steel, machineries, vehicle and transport equipment, mineral products, amongst others constituted 60% of the merchandise import during the review period.
It is also been underlined that the import payments for special projects related to machineries such as processing units and storage units alone stood at Nu 32.1bn, constituting almost 30% of the total imports.
Further, on the export front, total export recorded was Nu 58.8bn, which is a growth of 10.9% in FY 2021-22. The report states that with a fall in electricity generation, electricity export during the FY2021-22 witnessed notable decrease by Nu 2.4bn to Nu 23.7bn from the previous FY.
Similarly, from the total export, hydropower export constitutes 40.3%, a 9% drop from total export of Nu 53.09bn of the previous year. The decrease in electricity generation was mainly on account of shutting down of Chhukha and Tala hydropower plants for few months coupled with other hydrological factors.
While export of electricity dropped, the domestic sales relatively picked up by 9.5% from Nu 3.7bn in FY 2020-21.
Meanwhile, the net service payment also expanded drastically by 66.9% from Nu 8.5bn in of FY 2020-21 due to higher other modes, that is, freight payments of Nu 6.1bn on imports from Countries Other Than India(COTI).
While the service exports such as telecommunication, travel and government goods and services showed a trivial improvement by 11.8%,service imports recorded a significant increase by 58.9% to Nu 15.9bn during the review FY, which adversely affected the overall current account balance.
For instance, the net primary payment is widened by 2.3% from Nu 11.2bn in FY 2020-21, largely because of regular servicing of external debt, according to the report.
The report also mentions that during the FY 2021-22, no compensation was paid to cross-border workers and other short term foreign employees due to restriction on cross-border movements. Similarly, the compensation to Bhutanese working outside the country dropped marginally by almost 2.2% points to Nu 1.03bn.
The net secondary income receipts also declined by 29.3% to Nu 7.6bn mainly with a substantial drop of non-investment budgetary grant inflows and net inward remittances during the review period and the drop in net inward remittance was recorded at Nu 4.3bn, a decrease by 27.6%.
The total inward remittance dropped to Nu 6.8bn in FY 2021-22 from Nu 88bn in the previous year. The labour payments which constitute outward remittance doubled from the previous year’s payments at Nu 2.5bn, owing to gradual relaxation of labour import, according to the RMA.
Meanwhile, with the given higher surge in trade deficit followed by increased net service payments and fall in net secondary income receipts, the current account deficit hit an all-time high of Nu 63.4bn, 32.9 % of GDP.
Sherab Dorji from Thimphu
