… includes another fund to build solar power plant

Thukten Zangpo

The Asian Development Bank (ADB) approved USD 37.35 million (M) policy-based loan (about Nu 3 billion) to support Bhutan’s green and resilient economic recovery from the Covid-19 pandemic on October 18.

The loan will fund the first sub-programme of the fiscal sustainability and green recovery programme.

This includes supporting medium-term institutional and policy reforms to expand domestic resource mobilisation, promote private sector development, especially cottage and small industries (CSIs), and introduce climate-change adaptation and mitigation measures.

“The Covid-19 pandemic has severely affected Bhutan’s economy, which had been performing well in the past two decades. Fiscal sustainability is critical to Bhutan as it recovers from the pandemic and aspires to become a high-income country by 2030,” said ADB public management economist for South Asia, Chandan Sapkota.

He added that the government revenue would increase and expand the fiscal space for investments needed to achieve green, resilient, and inclusive development.

Nearly 40 percent of Bhutan’s economic activities that rely heavily on hydropower to drive growth are susceptible to climate change.

ADB stated that the programme would help lay Bhutan’s foundation for green recovery by supporting a national adaptation plan, climate-resilient development strategy, and green finance.

The programme would also help to strengthen domestic resource mobilisation, particularly through reforms in the areas of customs administration, tourism, a medium-term revenue strategy, and public financial management.

Given that business development in Bhutan is constrained by complicated processes, a shortage of skilled workforce, low digitisation, reliance on State-owned enterprises, and limited access to finance.

It would support streamlining of licensing procedures, promotion of business ventures, fiscal incentives for CSIs, and market-responsive technical and vocational education and training.

Earlier, the ADB provided USD 1M as technical assistance to support the implementation of policy actions, including the strengthening of executing and implementing agencies.

The bank also approved another fund of USD 18.26M for the construction of the first utility-scale solar photovoltaic power plant on October 19.

From the total financing, USD 8.26M will be a concessional loan and USD 10M as grants from the Asian Development Fund. The government would contribute USD 0.99M to the project.

The plant with a minimum total capacity of 17.38 megawatts peak would be built in central-west Bhutan.  The plant would generate 25 gigawatt-hours of electricity annually.

The initiative will help Bhutan diversify its energy mix since the country is exclusively reliant on hydropower, a sector vulnerable to the impacts of climate change.

“This project will be the country’s first major step toward diversifying power generation and increasing the resilience of its energy sector to future climate shocks,” said ADB energy specialist for South Asia Christoph Meindl.

“Increasing temperatures is projected to decrease glaciers and snow-covered areas, which will shift Bhutan’s hydrological system to a more rainfall-dominated pattern. This affects hydropower generation due to expected frequent droughts outside of the monsoon season and extreme high flows during the monsoon season,” the specialist said.

The project is supported by technical assistance amounting to USD 20,000 from ADB’s technical assistance special fund and USD 450,000 from the Republic of Korea e-Asia and Knowledge Partnership Fund.

Technical assistance will support learning opportunities on climate-resilient energy systems for higher secondary students in the science, technology, engineering, and mathematics stream as well as the department of renewable energy (DRE) under the economic affairs ministry.

Around 30 to 40 percent of women would be beneficiaries of the learning programmes.

The technical assistance will also help the DRE to conduct gender equality and social inclusion mainstreaming self-assessment that would help the agency adopt an inclusive policy on a corporate level, such as supporting gender-balanced staffing, proactive recruitment of persons with disabilities, and equality of pay, among others.