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Reserve decreased to INR 10.7B from 23.2B in April last year

Thukten Zangpo 

Bhutan’s rupee reserve has fallen by over 50 percent over the last eight months from April to December last year.

The rupee reserve was INR 23.2 billion (B) in April last year, but has decreased to INR 10.7B in December. That’s a fall of INR 12.5B, according to the Royal Monetary Authority’s (RMA) latest monthly statistical bulletin for July. The latest figure could not be accessed.

The reserve is a little above the central bank’s reserve threshold of INR 10B for all times to come. Going by the December reserve, it was enough to meet only 2.3 months of essential imports. In April, it was able to meet five months’ import.





While the convertible currency reserve was reported at USD 828.9 million (M) as of December last year. It also fell by over 25 percent from USD 1.15B in April last year.

The central bank has also maintained the threshold for the convertible currency reserve at USD 757M.

Meanwhile, total foreign reserve declined by over 30 percent to USD 970.4M as of December last year from April at USD 1.45B. It will be able to meet only 13.4 months of the imports.

The reserves have been declining because of lack of earnings from tourists and decreased export for more than two years due to the pandemic.

For an import-driven country, the rupee reserve is necessary as more than 80 percent of the country’s imports are from India.

Finance minister Namgay Tshering said that Bhutan is comfortable at present with the foreign reserve. However, he said that Bhutanese cannot become complacent since Bhutan is a largely import-driven country. “We are always in the deficit economy and we tend to spend either in INR or USD.”



Lyonpo said that the country has a foreign currency reserve to meet 14 months of essential imports. This is only 2 months more than the constitutional requirement to maintain a minimum foreign currency reserve to meet the cost of not less than one year’s essential import.

He added that an internal arrangement is already put in place through a standby credit facility with the Reserve Bank of India (RBI) where the RMA can lend INR.

Upon the request of the Bhutanese government, the Indian government extended the settlement period and reduced interest rates of the two-rupee standby credit facility as financial assistance from India.

Bhutan lent INR 3B in June 2012 and INR  4B in March 2013. The two-rupee standby credit, at an interest rate of 5 percent, expired on June 30 this year and was extended by five more years with a reduced interest rate of 2.5 percent.

According to the Bhutan Trade Statistics 2021, Bhutan’s imports from India grew by over 35 percent to Nu 71.2B including electricity last year from previous year.

However, Bhutan also received INR 24.4B from the sale of electricity to India.  The country receives INR from exporting electricity and as grants for the five-year plans.



The country also has to pay for the debt in INR or USD. As of March, this year, the country’s Rupee debt stood at Rs 154.9B and convertible currency debt at USD 884.2M (equivalent to Nu 67.2B).

In the past when the country was hit with a rupee shortage, Bhutan sold convertible currency to replenish the Rupee stock. An arrangement with the RBI has also been made where the RBI would facilitate the exchange of USD for INR and vice-versa.

Every year, Bhutan sells USD 300M to 400M from its reserves to buy Rupee. In 2021, Bhutan sold USD 600M for Covid-19 purposes.

During Lyonchhen’s recent visit to Bumthang, he informed that the government will implement three phases of interventions if the country’s economic situation does not improve.

Lyonchhen said that the government will stop importing non-essential commodities in the first phase, stop goods that are important but could not be disallowed from being imported in the second phase, and import only essential items in the third phase.



Lyonpo Namgay Tshering said that the government wants to inform the people and ask everyone to express solidarity to choose essential items over non-essentials.

In case the country faces reserve shortage, Lyonpo said that the government will rationalise certain items which are not essential at present and import would not be necessary. Import of non-essentials are also on the rise. For instance, in just 14 months, Bhutan imported 5,065 vehicles.

“If people continue to be complacent and continue to feel we are in a normal situation, no matter what kind of rules or arrangement that RMA brings in, the country at large will suffer,” he added.

Meanwhile, the President of the Trading Association of Bhutan, Tshering Tobgay, said that the businesses are not facing any INR shortages, as per their requirement they are able to exchange. However, he added that with declining reserves, businesses will not be able to get the INR soon.

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