In Bhutan, remittances are a silent force at work. Bhutanese people who migrate beyond their borders in search of new possibilities not only shape their futures, but also contribute significantly to the development of their homeland.

So, what is the current situation?

In 2020 alone as per the Royal Monetary Authority, Bhutan received Nu. 8.3 billion in remittances equivalent to $111.2 million, amounting to 39.2% of total ODA in the same year, higher than FDI inflow of $5.7 million and surpassing tourism earnings of $88.7 million in 2019, highlighting its significance as a valuable source of foreign exchange and income. In 2022, the figure, however, declined to $82.6 million despite rise in the number of Bhutanese migrating overseas. The drop could be attributed to several factors— the ongoing global economic slowdown and COVID-19 pandemic, which could have affected migrants’ earnings. The Bhutanese Ngultrum (Nu.) is also weakening against other major currencies, leading to a decrease in the dollar-equivalent value of remittances.

How does remittances help economy?

To start, it raises national foreign currency reserves, reduces current account deficit, improves household living standards, provides alternative financing sources and promotes financial inclusion, and stimulates local business and economy.

An important upside of remittance on recipient households is its counter cyclical effect wherein remittances tend to increase during economic downturns, providing a more stable source of income. For example, remittance flow increased by 5.2 per cent in 2020 in South Asia with similar trends observed in the Middle East, North Africa and Latin America.

It is, however, not all roses. Remittance money often fosters a culture of reliance and dependency, could distort markets, particularly real estate and may cause inflation to skyrocket. It has social ramification on demography given that the majority of those left behind are aging parents and young children. Above all, it renders the country’s economy volatile.

Essentially, the economic impacts of remittances on the Bhutanese economy will be determined by a number of factors, including the motivation and financial education of the migrants—how and where the beneficiaries choose to spend it, and the general political and business conditions in Bhutan and the host nation.

How do the Bhutanese spend their remittances?

While no research has been done around this, we know from anecdotal experiences that remittances are most used for:

  1. Household consumption: paying for food, utilities, products and services, debt, thereby stimulating local economy;
  2. Human capital development: investing in higher education, skills development, and health care costs; and
  3. Savings and Investments: there are two categories of investments— savings and fixed assets, such as land and homes, constructions, and business opportunities (development of any business opportunities).

Overall, the economic impact of remittances, whether immediate or long-term, is determined by how much of it is spent on these three types of spendings. High share of remittances spent on non-productive investments will only generate short-term consumption gains, whereas investments in productive sectors and human capital accumulation would generate employment, bolster economic growth and reduce poverty.

So, how do we ensure that Bhutanese spend effectively?

India, one of the largest remittance recipients ($100bn in 2022) have eased the process of repatriation of funds from its diaspora. It did so by simplifying processes of opening non-resident Indian (NRI) accounts, while offering attractive rates on deposits, preferential exchange rates and fee incentives to encourage the use of formal remittance channels.

It has also implemented digital secure transaction platforms and channels to ease cost and efficiency of remittance transactions. The World Bank estimates that the cost of transferring $200 to lower middle-income countries was 6%, twice the SDG target of 3%.

Developments in payment technologies would lower the cost of transactions. India’s national payment gateway—the universal payment interface (UPI)—which allows Indian migrants in Singapore to send money home is expected to bring the transaction cost closer to the UN’s target of 3%. India has also leveraged the power of its diaspora by issuing diaspora bonds to mobilize their savings and investments.

Likewise, the Government of Philippines has established a strong remittance infrastructure, providing multiple channels for remittance transfers, including banks, money transfer operators, and digital platforms. The country is inching towards offering tax incentives to remittance service providers in a bid to bring down transaction costs. It is also implementing remittance matching programme called “Diaspora for Development Initiative” wherein government matches certain percentage of remittance funds for investment in productive sectors.

Mexico, the second highest recipient of remittances in 2022 amounting to $60bn, also implemented a similar scheme called “3×1 for Migrants” to encourage diaspora resources. The Government matches three dollars for every one dollar contributed by migrants into community development projects in their place of origin.

Bangladesh has introduced policies to encourage its diaspora to send remittances through formal channels. The government has set up the Expatriate Welfare Bank, which provides financial services tailored to the needs of migrant workers and their families.

Some notable factors and policies that all high remittance recipient countries have in common are enabling financial infrastructure to ease inflows, reduced transactions costs such as incentives, competitive fees and exchange rates, and diaspora engagement to channel remittances into productive sectors.

To fully capitalize on the potential of remittances, Bhutan can adopt strategic measures to channel these funds towards productive investments and initiatives that contribute to sustainable economic development.

Here are some strategies that can be implemented:

Strengthening Financial Literacy: Empowering individuals and families, including those in rural areas, with financial literacy is crucial. By providing training and resources on managing remittances wisely, Bhutanese households can make informed decisions regarding savings, investments, and entrepreneurship. Financial education programs should focus on budgeting, savings, and identifying viable investment opportunities.

Remittance recipients can be encouraged to save a portion by establishing savings programs tailored to their needs. Collaborations with financial institutions and mobile banking services can facilitate easy and secure access to banking and savings products as evident from the TPay remit app introduced in 2018.

Formulating Diaspora Engagement Policy: Bhutan can leverage its diaspora by actively engaging them in the country’s development. Establishing platforms for knowledge exchange, skills transfer, and collaboration between the diaspora and local entrepreneurs can bring in expertise, technology, and investment. The government can facilitate networking events, conferences, and workshops to foster connections and create a sense of shared responsibility for the nation’s progress. This will play a pivotal role in proactively engaging and harnessing the economic potential of mature, economically stable and business savvy diaspora communities in the future.


Strengthening Remittance Data Collection and Analysis: Enhancing the collection and analysis of remittance data is vital for informed policymaking. By understanding the patterns, sources, and uses of remittances, policymakers can design targeted interventions and develop appropriate regulations to maximize their positive impact. Collaborations with international organizations and research institutions can bring in much-needed technical expertise and support in this area.


Supporting Entrepreneurship and SME Development: Remittances can serve as a valuable source of seed capital for aspiring entrepreneurs. Establishing business incubators, providing access to business development services, and offering microfinance schemes specifically designed for remittance recipients can encourage the formation and growth of small and medium-sized enterprises (SMEs). These initiatives can generate employment, foster innovation, and enhance local production capacity.


Infrastructure Development: Channeling remittances into infrastructure development can have a multiplier effect on the local economy. Improving transportation networks, expanding access to electricity and clean water, and enhancing digital connectivity will create an enabling environment for business growth, attract investment, and boost tourism.

Collecting data on the expenditure of remittances by Bhutanese within the country is of equal significance for the successful execution of any of the aforementioned strategies. To collect data on how Bhutanese are spending remittances, surveys, interviews, and data analysis can be administered. Surveys can be conducted among remittance-receiving households to gather information on their expenditure patterns. Additionally, financial institutions and money transfer services may have data on the use of remitted funds, which can be analyzed to gain insights into spending trends.

In conclusion, as Bhutan witnesses a notable surge in emigration to Australia, it becomes imperative for the nation to formulate and implement well-defined policy strategies aimed at harnessing the potential benefits of remittances. By proactively crafting policies that encourage and facilitate the flow of remittances, Bhutan can tap into this growing trend to boost its economy.


Contributed by

Mohammad Younus (RR UNDP), Tshering Lhamo

(Economist, UNDP), Tshoki Zangmo

(Freelance research