A most important department

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.

1 reply
  1. irfan
    irfan says:

    The mission statement of Ministry of Economic Affairs is “To create an enabling environment, including institutions and infrastructure for the sustainable growth of the economy through public & private sector development”.

    The major departments of MoEA includes Trade, Industry, Renewable Energy, Geology and Mines, Hydropower & Power Systems, Cottage & Small Industry and even a lot less talked about a department like Intellectual Property. A mention of these departments tells us that they together look after the sectors and industries that drive the economic growth. Many of these businesses are also government owned or just public. Interesting though, the vision statement of MoEA reads as “To promote a green and self-reliant economy sustained by an IT enabled knowledge society guided by the philosophy of GNH”.

    But we are presumably concerned about gaps in the policy making framework and hence, the newly formed department as ‘Department of Macroeconomic Affairs’. It’s probably the right foot forward looking at the objectives behind. “It shall deal with all matters relating to fiscal policies such as resource mobilisation, expenditure envelope, public debt management, capital market development, and relations with bilateral and multi-lateral financial institutions,” says news release from the ministry. Moreover, we are looking at a well co-coordinated management agency that will also liaise with the RMA on technical and analytical matters arising from the macroeconomic framework.

    This new department is also a welcome initiative considering the overall mission of Ministry of Finance…”To formulate and implement dynamic fiscal policies and sound financial management through maximisation of resource generation, efficient allocation, prudent expenditure and debt management, and proper accountability of public resources”. And we must not forget that MoF is having the highly notable departments like ‘National Budget’, ‘National Properties’, ‘Public Accounts’ and ‘Revenue & Customs’. A look at the departments also tells us what goes into the very important act of making the fiscal policies.

    By the way, the new ‘Department of Macroeconomic Affairs’ is also expected to bridge the gaps between the fiscal policies by the government and that of monetary policies controlled, coordinated and managed by RMA.

    To bridge the gaps in the policy making framework is one thing while clearing the bottlenecks in the bureaucratic framework is another thing. If it’s only about the later one, even the very best foot forward can only end up solving things with administration related growth within the civil services. We can’t expect the gaps and distances to converse between the departments of MoF and MoEA with the present administrative framework. The institutions remain as they are and hence, we are only expecting the well intended results from this newly formed department.

    I am also hopeful that with this new department in place, the other key departments of MoF get even closer within the overall Macroeconomic Framework of the Nation. And somewhere there is probably a need to integrate trade, industry and more importantly intellectual property along with cottage & small industries with even more intensity.

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