The government will implement the fourth phase of monetary measures for the private sector next month after Phase III ends this month.
Finance Minister Namgay Tshering said, during the presentation of the budget report for the fiscal year 2022-23 in the National Assembly yesterday, that the monetary measures are part of the government’s strategy to revive the economy.
“In order to continue supporting the impacted sectors, the monetary measures phase IV would be implemented through three windows, namely covering past non-performing loans (NPL), present credit portfolio, and future credit,” Lyonpo said.
With the Phase-III monetary measures ending this month, many in the private sector were worried about paying loan instalments, access to finance, and NPL.
To resolve the past non-performing loans, Lyonpo said that the NPL would be guided by the current NPL Resolution Framework with improved policies and judiciary support.
“It will be resolved either through debt restructuring or foreclosure in line with the existing rules and regulations,” he said.
He said that the Royal Monetary Authority (RMA) and the government are planning to settle the NPL issues out of court.
According to the budget report for the fiscal year 2022-23, the NPL improved from Nu 26.6 billion (B) in the fiscal year 2019-2020 to Nu 24.24B in the fiscal year 2020-21.
The service and tourism sector recorded the highest NPL accounting for 29.2 percent and manufacturing at 19.01 percent. These two sectors were severely affected by the Covid-19 pandemic. NPL are loans with payments that are overdue by 90 days or more.
Lyonpo also said that the government has identified eight targeted support measures for the existing loans-with loan equated monthly instalments (EMI) deferments extended over one to two years based on the sector risks or severity of impact from the pandemic crisis.
One of the measures, Lyonpo said, was to defer loan repayment from one to two years. He also said that there will be a provision for partial repayment which means 50 percent of EMI instalment to be paid from one to two years.
Lyonpo added that the borrowers can also extend the loan maturity period up to three years in addition to the deferred period and can even pay the EMI repayment frequency either on a monthly, quarterly, or half-yearly basis.
He also said that the overdraft facility (a credit agreement made with a bank that allows an account holder to use or withdraw more money than what they have in their account up to the approved limit) can be converted to term loans.
The existing loans can be split into multiple accounts, with fixed interest rates and others with variable rates.
Loans can also be transferred to a third party, in which borrowers can sell their properties mortgaged with banks to a third party, who will repay the loans.
Lyonpo also said that the gestation period of up to two years would be extended for the existing loans depending on the progress of the project.
For the credit support for economic recovery, he said that the RMA has come up with the improved or reformed End-to-End Credit Eco-System and enhanced judiciary support to expedite NPL resolution.
Similarly, the maximum loan term for hotels and restaurants under construction and setting-up is to be extended from 20 years up to 30 years excluding the gestation period. It is applicable for both existing and new loans.
To reduce the impact of the pandemic, the RMA with the government implemented accommodative monetary measures in various phases that were provided for immediate socio-economic relief to the people and also to the financial sectors to avert the risk of build-up NPL.
Some of the measures implemented under Phase I (April 2020 to June 2020), II (July 2020 to June 2021), and III (July 2021 to June 2022) monetary measures were deferment of loan repayments, term-based soft working capital facility for tourism-related business, term-based soft working capital to industries, and soft term loans as bridging loans.
To ensure a quicker and stronger economic recovery, Lyonpo said that the government had come up with regulatory and policy reforms.
“New business investments having a capital less than Nu 0.2 million (M) shall be allowed to commence operations through registration (without requiring to obtain clearance except for those under the prohibited and controlled list),” he added.
Lyonpo also said that the turnaround time for processing business-related documents would be reduced by 50 percent by all agencies. He added that the government will also adopt a regulatory sandbox system for innovative projects not covered under current regulations.
Under the fiscal measures, Lyonpo said the government reviewed and passed the new Fiscal Incentives Act of Bhutan 2021, which provides various incentives under direct and indirect tax categories in view of the current economic situation.
Similarly, he said the government provided a time extension to settle taxes due without levying 24 percent penal interest to the tour operators. “The time extension shall be until tourism business resumes in the country without any mandatory quarantine for tourists or extension up to December 31, 2022, whichever is earlier.”
The government also exempted the tax for small and micro-businesses in the rural areas up to December 31, 2024.
The government lost Nu 51.36M as revenue from waiving of payment of monthly rent and other charges for tourism-related business entities leasing government property.
Similarly, Nu 280M was foregone as revenue from the waiver of electricity charges and deferment of demand charges to industries.