The Royal Government and the World Bank signed on March 10 the Second Fiscal Sustainability and Investment Climate Development Policy Credit (DPC2) of USD24 million to help improve fiscal sustainability, access to finance, and investment climate.
According to a press release from the finance ministry, Bhutan has made impressive progress in poverty reduction and economic growth over the past decade. At the same time, high levels of investment in the hydropower sector have increased pressures on the country’s fiscal balance and external accounts.
“The World Bank is glad that this policy credit together with other programs are effectively supporting the Royal Government’s reform momentum,” said Yoichiro Ishihara, the World Bank’s resident representative for Bhutan. “With this policy credit, Bhutan will be better equipped to enact policies to foster private sector development and create more employment opportunities, especially for its youth.”
The credit was signed by finance minister Namgay Dorj and Yoichiro Ishihara.
This credit is the second of two operations to support Bhutan’s 11th Five Year Plan goals of promoting green socio-economic development and achieving self-reliance. DPC2 was approved by the board of executive directors of the World Bank on December 21 last year.
“The Royal Government of Bhutan has used the policy credit to support institutional strengthening measures in some key areas, building on the momentum and lessons learnt from the past budget support operations to accelerate development in Bhutan,” Lyponpo Namgay Dorji said. “Improving fiscal sustainability, access to finance and investment climate are critical to achieve the goals of the 11th Five Year Plan.”
The development policy series will be funded by credit from the International Development Association (IDA) – the World Bank’s concessionary lending arm with a maturity of 25 years, including a 5-year grace period.