Says it is a layman’s view to expert groups working on a roadmap

Ugyen Penjor

If surgeon Dr Lotay Tshering, the prime minister, had successfully controlled the tumour created by the new coronavirus so far, the attention now is on handling the impact COVID-19  left on the economy.

Allaying fears that the economy is in a downward spiral and that the government is concerned only with the health, Dr Lotay Tshering said that he was well aware of the economic situation and that strategies were being worked on to revive the economy.

Lotaynomics?

Calling it a layman’s view, Lyonchoen said that while expert groups, including a volunteer group, work on an economic way forward, he has asked his economic doctors to work with precision in chalking out a unique strategy and feel the pulse of the nation, after the COVID-19 cloud clears.

The government will spend and inject money to revive the economy. “There is no doubt. The government will absolutely spend. The experts are working on how and where to spend,” said Lyonchhen.

Saying he is not aware of what his economic plan is called, Lyonchhen said that the spending should generate returns. The advice to the committees was to design an economic package where the government will invest, but people work for the money and make some impact.

“If they have to bring down a mountain, beat iron or break stones, they will have to do. We will invest,” said Lyonchhen.

While details of the fiscal or financial measures will be shared soon, Lyonchhen said that he had cautioned on rash spending. “The COVID-19 cloud is getting denser, when it clears, the country should have benefited from government spending.”

The benefits are not as complicated as finding a name for the strategy. The Lyonchhen is looking into activities that would create jobs or engage people affected by the current problem, activities that would create more economic opportunities.

Citing the example of the Avain flu, Lyonchhen said that Bhutan became egg sufficient when the import of egg was banned. “We are importing vegetables, people should go back to the villages and work. We will teach them to work, give money. When the cloud clears we could be vegetable self-sufficient, our fallow land could be reduced to 10 percent,” he said. “But if they don’t work and demand hand outs, they should keep tightening their belts.”

One of the hardest hit, after the service sector is the construction sector from restrictions imposed on the movement of people.

Lyonchhen said that the government is ready to inject Nu 5 billion in the construction sector if infusing money could solve the problem.  “The problem today is with workers. Will the stimulus package help?” “If Bhutanese are wiling to carry cement and sand, we will be happy to pay them higher,” he said.

The idea is to replace expatriate workers in the long run. “If Bhutanese are willing to work in the sector, can feed their family and send children to better schools, we will spend.”

Those in the private sector say the slowdown is an old problem that started before the new coronavirus. The big concern is the lack of work and the loan repayment. Some have downsized while others are tightening their belts to get through the “crisis”.

“It is terrible,” said a trader when asked about business. “The coronavirus added to the problem and we are sinking,” he said. “There is no money circulating in the economy and the private sector is affected the worst.”

Those in the private sector feel that bureaucrats are cushioned from all economic shocks because they can rely on the government coffer.

“They are not bothered if 2,000 people in the private sector are laid off or if 50 businesses closed shops because it is not impacting them,” said a businessman. “The situation would be different if the salary of bureaucrats who make decisions are dependent on the performance of the private sector.”

They want initiatives like loan deferment, reduction in interest rates and stimulus packages.

The line of thinking in Lotaynomics is different however.  “Conventional economics stimulus plan is to play with monetary and fiscal measures. Waiving off loans, deferring loan payment or reducing interest rates are easy, but we will have to do it based on the situation,” said Lyonchhen.

One priority, the government has asked the committees, was to see if activities in the 12th Plan could be re-prioritised. “The 12th Plan was made during peaceful times. But now with an emergency, we have to priortise,” said Lyonchhen. “We need to priortise activities that would engage more Bhutanese, require less foreign hands and minimise import?”

The government is ready to push activities whose impact will be felt after fiver years. Some, if needed, will be pushed to the next plan.

Loans, waivers and home ownership

Lotaynomics has a different approach to deal with non-performing loans (NPL) or the heightened risk of NPL. Wary of loan defaulters, the prime minister said that the government doesn’t want to see properties auctioned or property sold during the COVID period, but not at the risk of destabilising the banking system.

The strategy is to not jump to the rescue. “When we reach the auction period, we will see if business would pick up. If not we will change policy,” said the PM. “Government will buy the properties at market price to inject money in the market. We will buy and keep it as government property. When the situation improves people can buy back at the same rate.”

The PM’s strategy is to make the most of the COVD-19. His advice is exploring options to turn the properties acquired to affordable housing apartments to be then sold to public servants. “If someone had served for 34 years and do not have a house, he can pay in 34 years or in 10 years if you have served for 10 years,” said Lyonchhen.

The idea is to not sell the property in the open market to avoid amassing property by those with money.

Another strategy that could go well with those affected by the economic downturn is the options the PM asked to explore on bank loans. Mindful of the liquidity crunch, the PM said that direct interference by asking banks to reduce interest rates or deferring payment period would effect the banks and put banks out of business.

The advice was to see the possibility of redesigning banking system. “We could hold approved loans if a construction has not started and get the money back,” he said.

Waiving off, Lyonchhen said, would be a problem, as everybody would want waiver. “The risk is those who can pay will not pay,” he said.

COVID- 19 a blessing in disguise

Despite the scare from the new coronavirus on the economy, Lyonchhen said that Bhutan’s economy is easier to manage, as the main contributor to the Gross Domestic Product is the government. With about 35-percent contribution to the GDP from government, he said the crisis is easier to control. “The government can absorb the shock as the contribution from the private sector is minimal,” he said.

However, he said that the government will look at different angles. “We will create projects that will employ more machineries or create jobs. We have asked the banks to lend in those sectors,” he said.

“Banks should prioritise its lending. For me landings should result in economic activities, not buying Toyota Prados.”