… the measure is to save foreign currency reserve
Tshering Palden and Thukten Zangpo
The finance ministry yesterday announced the moratorium on the import of non-essential vehicles with immediate effect until further notice.
The moratorium is implemented to ensure adequate foreign currency reserves for maintaining macroeconomic stability. The announcement comes after the country’s foreign currency reserve has dwindled after Covid-19 restrictions have been lifted.
The surge in imports widened Bhutan’s trade deficit from Nu 13.8 billion (B) in the first three months of this year to Nu 27.3B as of June this year.
Bhutan imported more than 8,000 vehicles between June 2021 and June 2022. The import of vehicles is one of the main contributing factors to depleting the reserve.
Bhutan’s foreign currency reserve currently stands at USD 845 million (M), including USD and Indian rupee. Royal Monetary Authority’s record shows the reserve depleted by over 30 percent from April last year (USD 1.46B) to March this year at USD 984.8M. The foreign currency reserve was able to meet 9 months of essential imports.
Article 14, Section 7 of the Constitution of the Kingdom of Bhutan states: “A minimum foreign currency reserve that is adequate to meet the cost of not less than one year’s essential import must be maintained.”
This measure, the ministry stated, is to uphold the Constitutional provision and most importantly to address the macroeconomic imbalances that the entire world is going through as an initiative toward protecting the foreign currency reserve.
The moratorium applies to import of all vehicles including two-wheelers except utility vehicles, heavy earthmoving machines and agricultural machinery. only utility vehicles costing less than Nu 1.5M or USD 20,000 (whichever is less) will be exempted.
Vehicles for the use and promotion of tourism are also exempted from the moratorium.
The terms and conditions, and type or number of vehicles to avail of the exemption from this moratorium will be submitted by the Tourism Council of Bhutan, according to the ministry’s notification.
Taxis both fossil and electric which are due for replacement shall be exempted from this moratorium.
The moratorium shall be reviewed and amended (where necessary) after six months depending on the foreign currency reserve position.
“In this national endeavour, the government calls upon every individual to collectively support the measures to strengthen our economy,” the notification stated.