Climate shocks and service gaps threaten Bhutan’s poverty reduction gains

Jigmi Wangdi

Bhutan’s hard-won gains in poverty reduction are under perilous threat from climate shocks and persistent service gaps, warns the World Bank’s Poverty and Equity Assessment 2024.

A key finding of the report is that a considerable part of the population lives perilously near the poverty line, facing a high risk of being pushed back into hardship by even the slightest shock.

The country’s poverty rate has declined from 31.7 percent in 2003 to 12.4 percent in 2022.

The assessment reveals the extreme fragility of many Bhutanese households. Raising the poverty line by just 15 percent would cause the poverty rate to jump by six percentage points, increasing the number of people living in poverty by 50 percent.

A mere 25 to 50 percent increase in the poverty line could double or triple the impoverished population, exposing the thin margin separating near-poor families from acute deprivation.

In 2022, vulnerability to poverty stood at 19 percent, affecting approximately 150,000 people, seven percentage points higher than the official poverty rate. This vulnerability is significantly more pronounced in rural areas, impacting 26 percent of residents compared to just seven percent in urban areas.

Factors such as low education levels, asset poverty, and high dependency ratios deepen this risk, with households led by individuals with limited schooling being particularly exposed.

Bhutan’s unique mountainous geography and heavy reliance on agriculture make it acutely vulnerable to climate-related shocks.

The report details how historical hazards like floods, landslides, glacial-lake outburst floods (GLOFs), and droughts are intensifying due to climate change.

Projections indicate that increased glacial melt and heavy monsoon rains will lead to more frequent and severe flooding, with the economic cost of flooding alone potentially reaching up to 4 percent of GDP by the 2030s.

A combined analysis of hazard exposure and poverty mapping shows that the central southeast and southwestern regions, particularly Zhemgang, Samtse, Samdrupjongkhar, and Trashigang, suffer the highest overlap of both risks.

An estimated 68 percent of the poor and 67 percent of the near-poor are exposed to multiple climate risks, including landslides, heatwaves, and floods. This convergence of risks could push already vulnerable communities into deeper hardship if not addressed systematically.

Alongside climate resilience, the country faces persistent geographic disparities in service access and quality that continue to disadvantage rural populations, especially the poor.

Despite near-universal access to electricity, internet, and improved water sources, the quality of these services varies unevenly across districts. Over 50 percent of households in areas like Haa, Samdrupjongkhar, and Samtse report frequent electricity disruptions.

Access to 24-hour drinking water remains patchy, and many households still need to treat water for safety. Internet reliability also varies widely, with Trongsa and Samdrupjongkhar among the least connected.

The rural poor remain particularly isolated from essential healthcare and education facilities. Nearly half live over an hour from a health facility, and over 38 percent are similarly distant from an education center. In contrast, only about 14 percent of the rural non-poor face the same travel burdens.

These geographic inequities translate into real opportunity gaps, households more than 30 minutes away from key services are more than twice as likely to be poor.

Even within the same districts, poverty rates vary widely. Gewog-level poverty mapping reveals localised pockets of hardship often hidden by aggregated data. Thimphu, Chukha, Zhemgang, and Samtse host the largest absolute number of poor residents, reinforcing the need for highly targeted interventions.

Policy recommendations

The report recommended enhancing resilience to climate-related hazards through a coordinated, government-wide approach. It urges the integration of climate and disaster resilience into infrastructure and building standards, and the strengthening of early warning systems and financial risk management.

To further mitigate poverty risk, the Bank stressed the need for a robust, inclusive social protection system, including expanding non-contributory schemes and disability-inclusive policies, and establishing interoperable data systems for shock-responsive interventions.

Financial inclusion and access to banking services must also be improved, especially in rural areas where poor households often rely on informal networks for emergency support.

The agriculture sector, particularly susceptible to climate shocks, requires targeted support. The report advised increasing investment in digital extension services, irrigation, and incentives for sustainable land management to promote climate-resilient agricultural production.

Addressing regulatory barriers to export-oriented crops and irrigation practices could drive structural transformation and enhance food and income security.

Similarly, to address geographic inequality in service delivery, the Bank calls for sustained investment in human capital and improved public service delivery. It recommended adopting a resource allocation framework that ensures fairness, transparency, and cost-effectiveness in resource distribution based on local needs. Central and local governments must collaborate on plans that weigh the spatial trade-offs between service coverage, cost, and quality.

The report also recommended for a stronger private sector participation in infrastructure development through public-private partnerships, especially in remote areas. These efforts should be guided by robust accountability mechanisms to protect public interests while leveraging private expertise and capital.