Debt level, however, increased by 42 percent

Report: Should the new hydropower construction and commissioning of ongoing hydropower projects ensue as scheduled, the country’s economic growth between this and the next fiscal year, is projected to grow at an average of 10.2 percent. This is according to the Royal Monetary Authority (RMA).

From a record low of 2.05 percent, the GDP growth gradually soared to 5.7 percent in 2014 and 6.5 percent in 2015.

In its annual report, the RMA stated that the medium-term economic growth prospects for the country remain favourable.

The RMA projected that both trade and current account deficits are expected to fall from the average of preceding year of the Plan to 19.8 percent and 24.3 percent of GDP respectively.

“As a result, Bhutan’s overall balance of payments is projected to be positive, with reserves growing at an average of 14.3 percent per annum during the period,” the report stated.

Yet, it was highlighted that Bhutan continues to face numerous structural weaknesses and challenges that need close attention to ensure the long-term sustainability of the economy.

“Our economy can no longer be sustained on the back of a single economic sector although hydropower development remains a vital catalyst for socio-economic development,” the report stated.

The RMA stated that longer-term strategies are needed for structural transformation by strengthening productive sectors such as cottage and small-scale industries and development of agriculture sector.

But the current figures reveal that trade deficit remained elevated at over 20 percent of GDP, pushing the current account deficit from 29.8 percent in 2014-15 fiscal year to 31.2 percent of GDP in the last fiscal year.

It was aid inflow, the capital and financial account surplus has been more than sufficient to finance the current account deficit.

As of June 2016, the country’s gross external reserves stood at an equivalent of USD 1.118 billion, of which Rs 20.8 billion were Indian Rupees and USD 811 million were convertible currency reserves.

While reserves were sufficient to finance 13.2 months of merchandise imports, reserve buildup is still being driven by aid inflow and hydropower financing, which are cyclical and temporary in nature.

There has also been a concomitant increase in external debt levels as Indian Rupee debt has reached Rs 115 billion as of June 2016 and convertible currency debt stood at USD 609 million.

This is an increase by 42.1 percent and 4.8 percent respectively compared with the previous year. However, almost all of the convertible currency debts are concessional loans used for financing various socio- economic development projects and over 88 percent of Indian Rupee debt are hydropower debt.

Tshering Dorji