… gains by 35 chhetrum from February this year

Thukten Zangpo  

Ngultrum has weakened by 5.34 percent against the USD in June this year from the same month last year. 

Ngultrum ended at Nu 82.25 per USD as of June after strengthening by 35 chhetrum from Nu 82.6 in February, according to the Royal Monetary Authority’s figure. 

The value of Ngultrum against USD in the past five years has depreciated about 15 percent. One USD was equivalent to Nu 68.4 in 2018. 

Last year, with rising geopolitical tension after the Russian war and the US central bank, Federal Reserve hiking interest rates for borrowings to fight inflation, the USD as global currency was traded at the highest level in 21 years.

During the period, the Ngultrum was seen steadily depreciating from Nu 72.45 per USD in January last year to Nu 82.36 as of December last year. It was a fall of more than 10 percent. 

However, at the end of last year, with inflation falling back, and expectations of interest rate hikes slashed, the USD gave up its strength. 


Any movement of INR against the USD has a direct impact on Ngultrum because Ngultrum is pegged with the Indian rupee (INR). India depends on dollar-denominated imports for over 85 percent of its crude oil requirements. A rise in global crude oil prices will shoot up India’s import bill when the dollar strengthens. This directly impacts the value of Ngultrum since Bhutan imports 100 percent of its fuel requirement from India.

According to the media reports, the decline in price of crude oil and other commodities and anticipated foreign investors to purchase Indian stocks, the Ngultrum or INR against USD’s recovery prospects seem more promising in the second half of this year. 

At the same time, Bhutan’s inflation rate has been declining since June last year from 6.54 percent to 3.83 percent in June this year with a decrease in food prices.

As the value of Ngultrum against USD depreciates, there is a corresponding increase in the cost of imports with Bhutan importing more than 80 percent of goods. Conversely, Bhutan gains from exports if the Ngultrum’s value against USD appreciates.

A weaker Ngultrum against the USD tends to inflate Bhutan’s import bill and widen the deficit between its imports and exports and vice-versa.

According to the finance ministry’s figure, the country’s imports from third countries surged to Nu 7.44 billion in the first quarter of this year from Nu 6.84 billion in the same period last year.

However, the export to third countries increased to Nu 6.75 billion from Nu 2.01 billion during the same period. The country’s trade balance with third countries saw a decrease to Nu 691 million from Nu 4.82 billion during the same period.

A depreciating value in Ngultrum would also mean that we have to pay more for the convertible currency (CC) concessional loans from multilateral institutions and bilateral partners.

With the pegging arrangement, a major portion of external debt denominated in INR has cushioned the impact of exchange rate risks. However, the CC debt amounting to USD 988.69 million or equivalent to Nu 81.69 billion as of March this year is subject to exchange rate risk.