Thukten Zangpo 

The country’s foreign currency reserve is adequate to meet 12 months of essential imports, as required by the Constitution, Prime Minister Dr Lotay Tshering said during the Meet the Press session yesterday.

The country’s current convertible currency reserve, Lyonchhen said, stands at USD 850 million (M), while the minimum requirement is USD 668M.

As per the central bank’s provisional figure, the country’s total reserve was recorded at USD 839.6M as of June this year, a decrease of USD 145.2M from March.

The rupee reserve (INR) dropped to INR 9.68 billion (B) as of June from INR 20.38B in March. It was below the central bank’s required threshold of INR 10B for all time to come.

Bhutan’s convertible currency was reported at USD 717M as of June. It was short by USD 40M from the central bank’s threshold of USD 757M.

“The foreign currency reserve has been depleting but the depleting rate has slowed down,” Lyonchhen said, adding that the government keeps an eye on the reserve every day.

“Should it be of any alarm, we have a list of imports of non-essential items that will go into moratorium,” Lyonchhen said.

He added that the moratorium on the import of vehicles in August this year could save the country around Nu 5B in a year.

Similarly, the ban on non-essential items is expected to save an additional Nu 2B to Nu 2.2B in a year, Lyonchhen said.

The government receives convertible currencies from the central bank’s three accounts – international borrowings, grants, and from the export of goods.

Lyonchhen informed that Bhutan is in dialogue with the multi-financial institutions to consider Bhutan to borrow beyond its eligibility.

The countries and financial institutions have their own eligibility for borrowings depending on the borrower country’s consumption capacity and the size of the economy.

Lyonchhen said that the country is already receiving the grants but with no additional grants, the government is exploring the loans.

With the lifting of the Covid-19 restrictions, the country’s trading will pick up which could put more pressure on the foreign currency reserve.

The country’s imports increased to Nu 35.89B in the second quarter (April to June) this year from Nu 22.87B in the first quarter (January to March). This has widened the country’s trade deficit from 13.12B in the first quarter to Nu 21.23B in the second quarter.

Lyonchhen said that the government is watchful of the country’s balance of trade. With re-opening of tourism on September 23, he expects to earn convertible currencies.

However, he said that Bhutan’s trade deficit trend is in a difficult situation since the government expenditure supports 35 percent to 40 percent of the country’s gross domestic product. “Injecting capital in the economy results in more imports.”

According to the central bank, the banks and non-banks’ total loans stood at Nu 179.57B in March this year as compared to Nu 169.8B in March last year. It saw an increase of Nu 9.77B.