… from suspension of construction loans to non-essential items import 

Thukten Zangpo  

To save the plummeting country’s foreign exchange reserves, it is likely the government will add more items to the import ban list and monetary measures.

In addition to the continuation of the moratorium on vehicle import, the finance ministry has proposed to the Cabinet, a phase-II moratorium to suspend construction loans and put a ban on the import of furniture, processed meat and food items, junk foods, alcohol, and LED television.

The ministry is yet to receive a directive from the Cabinet.

The Royal Monetary Authority (RMA) has to alarm the government, three months in advance, if the projected reserve is going to hit the constitutional requirement.

Bhutan is mandated by the Constitution to maintain foreign exchange reserves to cover at least 12 months of essential imports.

The country requires at least USD 668 million (M) of foreign exchange reserves to meet the constitutional requirement.

According to the RMA’s provisional figures, the foreign exchange reserve position was recorded at USD 797.6M in October last year, adequate to meet 14.33 months of the country’s essential imports. 

However, the latest figure was not accessible.

The reserve saw a decline of over 37 percent from USD 1.27 billion (B) in the same month the previous year.

Bhutan’s foreign exchange reserve declined because of the surge in the import bills, as more than 80 percent of goods are imported into the country.

Figures from the finance ministry show that the country’s import bill rose to Nu 93.03B as of September last year, surpassing the one-year’s import of Nu 90.23B in 2021.

This widened the country’s trade deficit to Nu 48.14B in September last year. It was an increase of Nu 15.9B from 2021.

To protect the foreign exchange reserve, the RMA, from February 6 this year, revised the foreign exchange reserve quota for travellers.

The monthly private travel quota of INR 25, 000 cash per person per month saw a revision to INR 25,000 per person semi-annually or after every six months.

At the same time, for the USD annual travel scheme modality, the residents travelling to third countries are permitted to avail of USD 1,000 in cash and USD 2,000 in cards per year.

Earlier, a private traveller to third countries used to get a cash limit of USD 3,000 per year.

To ensure adequate foreign currency reserves, the government banned the import of all vehicles except utility vehicles, heavy earth-moving machines, and agriculture machinery from August 19 last year.

A few years back, Bhutan faced the rupee crisis because of the lending spree since most of the country’s credit translated into imports, declining the rupee reserve and hurting the current account balance. It saw loan and import restrictions on housing and vehicles.

Figures from RMA show that the financial institutions lent Nu 191.96B as of September last year, an increase of Nu 16.2B from the same month the previous year.

Housing loans, which translated to over 80 percent of imports, contributed 27 percent of the total loan recorded at Nu 51.83B.

At the same time, the trade and commerce loan and transport loan were recorded at Nu 16.39B and Nu 9.98B respectively.

Education loans accounted for Nu 10.25B.