Many households lack savings to see through Covid-19 crisis

Study recommends reviewing monetary and fiscal measures

Yangchen C Rinzin

The government must priotitise households and individuals with vulnerable members to provide relief and alternative employment opportunities, the Rapid Socio-Economic Impact Assessment of Covid-19 on Bhutan’s Tourism Sector (RSEIA) recommends.

The report, which was released on Monday, says that the risk is compounded in those households with vulnerable members and these households require prioritised and targeted support to protect and cater for their needs.

According to the survey analysis conducted by the UNDP Bhutan and NSB, a household with a newborn will incur more expenses or chronically-ill individual may require extra care and medication.

The RSEIA was carried out to gain a quick understanding of the overall nature of impact of Covid-19 on tourism and the effect on individuals.

A total of 1,285 individuals engaged in tourism and affiliated sectors were interviewed in April.

“Support re-skilling and upgrading within the tourism sector itself,” the report stated. “The Tourism Stimulus Package can be also further complemented by implementing relevant suggestions from the UN World Tourism Organisation to adopt mitigation and recovery from the pandemic.”

  Although the three-month loan payment deferment has provided immense relief, especially to hotel owners, the report stated that it might not be sufficient to ease the debt burden in the long run.

It recommended that stimulus package, as well as monetary and fiscal measures may need to be reviewed in supporting business, especially the small ones. “It also recommends incentives and help business to retain their employees.”

The report also recommends innovative policy solutions to address the grave debt burden of business owners and build robust, shock-responsive social protection schemes like encouraging a saving culture.

The report found that the decline of the tourism sector has impacted on the individuals and households’ livelihoods where one third of the respondents lost their jobs or sent on leave without payment.

“Majority households’ income is not diversified beyond tourism and majority are experiencing a drop in their monthly household income by 50 to 100 percent,” the report said. “Many households lack savings to carry them through the crisis.”

It was also found that many had added burden on the family finance like investment in gadgets and technology to support e-education for children.

Almost a quarter of people with chronic illness also reported that they were unable to access medical services or medication due to pandemic crisis. Lactating mothers or pregnant women reported that they missed their regular check-ups.

“More than half of hotel employees received their regular salaries while a few were partially paid and a very few lost jobs or quit,” report stated. “They’re hopeful that additional government measures would be put in place.”

Going by the report, the respondents expressed that with Covid-19 crisis hitting hard, they expect government’s help to cope up with the situation or rely on their current salary. Some have opted to look for another employment or rely on salary of a member earning in the same household.

Some of the supports respondents expect are receiving some form of rent support (either from government or landlords), getting trained for new skills, receiving unemployment benefit, and job opportunities.

“Almost half of them shared that the community was less united than before the Covid-19 crisis. This indicates community bonding is lower than one may expect at a time of crisis,” report stated.

The anecdotal evidence also revealed that some households who are vulnerable are spending less on non-essential items. Some of them do not have savings to meet household needs.

There are more than 3,000 travel agencies, 160 TCB certified hotels (3-5 stars), 665 budget (or non-certified) hotels and over 4,200 restaurants and cafes in Bhutan.

Numerous handicraft shops, porter services, rafting and trekking companies and small businesses around the country rely on tourism for their livelihood.

The impact of Covid-19 on tourism also has a direct impact on Bhutanese financial institutions as numerous hotels constructed amidst the recent tourism boom are unable to repay their loans, according to the report.

In 2019, the “Services and Tourism” segment recorded the highest percentage (31 percent) of non-performing loans (NPL) at Nu 6.7 billion (approximately USD 95.3 million).

Hotels and restaurants constituted 13 percent of the NPL in the segment at Nu 836.2 million (approximately USD 11.9 million).

“A prolonged period of halt in tourist arrivals can lead to further credit defaults and strain financial institutions all the more,” the report.

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