The government and the Asian Development Bank (ADB) yesterday signed a USD 30 million (M) policy-based loan agreement under the Financial Market Development Program – Subprogram 2.
Policy-based loans provide the borrowing member countries with flexible liquid funding to support policy reforms in various sectors including financial sector.
The loan will be provided as budgetary support to the government to improve its financial market reforms targeted at increasing access to finance of the private sector and improving financial inclusion in Bhutan.
The objectives of the programme are aligned with key result areas of the 12th Plan, including macroeconomic stability, economic diversification, improving access to finance, and poverty reduction.
The support covers the banking system, nonbank financial institutions, financial inclusion, and financial literacy.
The loan will build on the first USD 30M policy-based lending extended by ADB under “subprogram 1” which was implemented from January 2018 to October 2019.
A press release from the finance ministry stated that ADB has been instrumental in providing budgetary support to Bhutan and also in helping strengthen Bhutan’s financial system, including the central banking role of Royal Monetary Authority.
Lyonpo Namgay Tshering at the signing said, “The programme will continue to add budgetary support while achieving financial reforms which is highly relevant during this challenging time of the pandemic.”
ADB’s country director for Bhutan Kanokpan Lao-Araya said that more than three and a half decades, ADB has been a reliable partner to the Government of Bhutan in designing and implementing financial reforms in both bank and nonbank sectors.
She said that the assistance had evolved over time to keep up with the development landscape, including addressing long-term government bond issuance, cyber security, and green financing.
“The programme will address financial sector deficiencies and vulnerabilities, which will ensure greater stability, efficiency, and inclusiveness for the benefit of Bhutan’s economy at large,” Kanokpan Lao-Araya added.
The press release stated that ADB was committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty.
Established in 1966, it is owned by 68 members, 49 of which are from the region.