Advertisement

Thukten Zangpo

With prices of goods skyrocketing, many people are feeling the pinch, but it is the middle and low-income groups that are hit hard.

Sharing how inflation has impacted his family, a construction welder in Thimphu, Singye, said he is struggling to feed his family of three.

Working four months a year, the 40-year-old said his income of Nu 30,000 a month is not adequate to even support basic needs of his family. “I pay Nu 6,200 a month as rent and have to finance other necessities judiciously.”

He said his family has to sacrifice a lot of things.

He is not alone.

Tenzin, 20, works as a salesgirl in a grocery shop and earns Nu 10,000 a month.




Staying in a free apartment the shop owner allowed them to reside, she said she doesn’t buy many vegetables as it is unaffordable. “I stopped buying eggs when the price rose to Nu 450 to 500 a tray.”

She said the inflation has forced her to stop buying many necessities. “My salary is not even enough to meet basic needs.”

A housewife, Choden, who came to shop at the vegetable market in Thimphu, said that the food prices have doubled in recent months.

She and her three children depend on her husband, who is a civil servant. “We cannot afford to buy clothes for our children now.”

Choden claimed her husband earns about Nu 17,000 a month and they face difficulty meeting the monthly expenses.




A civil servant said that after paying house rent of Nu 10,500, Nu 3,500 to fuel his car, and Nu 6,500 for food expenses and other expenses, he is left with only Nu 3,000 to Nu 4,000.

Economists said that any increase in the price of essential commodities such as food, cooking gas, and fuel in a time of high inflation will force people to cut back on other priorities.

As per the National Statistical Bureau, consumers are paying 5.57 percent more for the same goods and services they paid in March last year.

However, it has remained below the Royal Monetary Authority’s upper threshold of 6 percent since February this year.

Food prices went up by 4.01 percent contributing to 36 percent of the overall inflation rate and non-food saw a 6.92 percent increase contributing to 64 percent in March this year compared to last year.




Fuel prices have more than doubled since May last year due to the Ukraine-Russia conflict. Rising fuel price has a cascading effect on the cost of goods because it increases the transportation and production cost.

The World Bank in its latest Commodities Market Outlook report stated that the global food and fuel price shocks linked to the Ukraine-Russia conflict are set to last until at least the end of 2024.

“Energy prices are expected to rise more than 50 percent in 2022 before easing in 2023 and 2024, while non-energy prices including agriculture and metals are seen climbing by almost 20 percent in 2020 before moderating,” it added.

National Accounts Statistics 2021, shows that the consumer spending measured in total private household final consumption expenditure fell by about 9 percent in 2020 from the previous year.

Consumer spending for food and non-alcoholic beverages fell by 41 percent.




Economists say that inflation has hit the economy when it is recovering from job losses and pay cuts.

The price rises are highest for goods and services that form the largest part of the spending of the poorest.

A professor of Economics at Royal Thimphu College, Sanjeev Mehta, said that inflation is triggered by the disruptions in global supply chains, rise in fuel prices, and higher consumer spending in the economic recovery phase since the pandemic-led recession in 2020.

He added that it is hurting fixed income groups, workers in informal sectors, small businesses, and the poor.

“Combined with higher unemployment, rising inflation will push more people below the poverty line, household debt will also rise, and spending cuts will follow,” Sanjeev Mehta said.




He added that the government and central bank are in a dilemma. “With an aim to support recovery, monetary tightening and spending cuts may not be desirable. Administrative measures should be strengthened to avoid tendencies for artificial shortages, black marketing, and high markups.”

The rising inflation has also eroded the purchasing power of the consumer.

The purchasing power of Ngultrum was Nu 61 as of March 2022 compared to December 2012, which means that Nu 100 today is worth only Nu 61 in March 2012.

As inflationary pressure in Bhutan is largely borrowed from India with more than 80 percent of goods imported from India, inflationary pressure is anticipated within the range of 5 to 7 percent over the medium term (fiscal year 2022-23 and 2023-2024).

Advertisement

Skip to toolbar