The country’s international reserve position as of August this year was at USD 1.1B, of which the rupee reserve forms Rs 20.5B. Convertible currency reserve was at USD 817M.

The rupee reserve in the beginning of the year was Rs 23B, the highest in 2018. In the following month of February, it fell to Rs 17B and dipped to Rs 11B in April, which gradually picked up. This is according to the Royal Monetary Authority’s (RMA) recent monthly statistical bulletin.

On the convertible currency, reserves improved from USD 802M in January this year to USD 817M.

The total reserve is enough to finance 14.3 months of merchandise import. Convertible currency reserve alone is sufficient to finance 75.6 months of merchandise import driven in USD. However, the rupee reserve will meet 4.4 months of merchandise import driven in INR.

It is a Constitutional requirement that a minimum foreign currency reserve that is adequate to meet the cost of not less than one year’s essential import must be maintained.

Foreign currency reserve is crucial for Bhutan as ngultrum is not a legal tender outside the borders. For an import-driven country, rupee reserve is necessary as more than 80 percent of the country’s imports are from India. 

Since rupee is not a convertible currency, thus the importance of foreign currency.

In the past, when the country was hit with rupee shortage, the country sold convertible currency to replenish the rupee stock. Commercial borrowing in rupee was also backed by the country’s convertible currency reserve, like a mortgage.

Recently, an arrangement with the Reserve Bank of India has also been made where the RBI would facilitate exchange of USD for INR and vice versa. The government in consultation with the Central Bank has also decided to set a threshold rupee reserve of INR 10B and convertible currency reserve of USD 757M for all times.

However, the country’s reserves are primarily built on foreign aid inflow, including the hydropower funds and proceeds from export of electricity.

As the country graduates from the category of least developed country, it has been projected that aid from multilateral agencies will decline. To ensure minimum impact on the reserve from declining inflow of fund from aid and grants, the RMA has taken initiatives.

For instance, the RemitBhutan is expected bring foreign currency earnings of the Non-Resident Bhutanese into the formal banking channel.

The Royal Monetary Authority (RMA) has also collected USD one million in 369 days after it set up a foreign exchange counter in Paro International Airport.

This is in addition to about USD 0.9M the Bank of Bhutan (BoB) collected at its foreign exchange counter in about seven months. Together, the two forex counters at the airport earned close to USD 2M.

In an earlier interview, the RMA governor, Dasho Penjore, said this initiative would not only facilitate the visitors exchange USD right at the airport but also help the country build its foreign currency reserve.

He said the level of international reserve was reflective of country’s wellbeing, its credit worthiness and credibility of the country.

Rupee exchange counter at the immigration office in Phuentsholing also collects about Rs 500,000 on a daily basis. Within five months, the rupee counter has added more than Rs 13M to the rupee reserve. This amount the governor said would easily meet the rupee needs of the pilgrims visiting India.

Tshering Dorji