It is most timely that the finance ministry has set up a new Department of Macroeconomic Affairs.
This department will monitor macroeconomic policies and programmes, and advise the government. It will also liaise with the central bank. This is particularly important.
Currently, it can be observed that economic policies are not handled in a consolidated manner. There are many stakeholders involved. The government is responsible for fiscal policy, while the central bank, banks and private sector handle monetary policies.
According to a recent Asian Development Bank assessment of the financial sector, it was found that while agriculture accounts for about 16 percent of GDP, it gets only three percent of the credit pie. In contrast, the report states that despite a housing crisis in the works as a result of over building, credit is concentrated in this sector.
Agriculture is the bedrock of the economy. It is also a key to achieving self-sustainability. Yet, it gets only three percent of all credit, which means there is a disconnect in the policies of the government and the financial institutions.
The government’s recent move to get the financial sector to lower interest rates for the productive sectors is a step towards addressing this disconnection.
The new department should permanently bridge this gap and offer much needed advice to both the government and financial institutions, so that they’re on the same page.
There is a common national goal, and the economy needs to move in that direction as one entity.
With such a department in place, it is hoped that problems like excessive credit for activities that are solely for consumption is limited and carefully monitored to ensure a health balance of payments.
We need to see more money flowing towards people and companies that are attempting to set up businesses in the country, that will generate employment for Bhutanese and spark creativity, keep money within our borders, and basically add value to the economy.
By achieving this, we should expect to see our standard of living rise, but in a sustainable manner, and unemployment satisfactorily managed, among others. In all, the goal is for everyone to be headed in the same direction that will enable a self-sufficient Bhutan.
The formation of the department is another enabling move in this direction.