Says laying off staff and cutting salaries not a solution for now
The economy is bad, but all hope is not lost, according to Finance Minister Namgay Tshering.
“We are experiencing an economic slowdown, but it (economy) has not crashed. If our economy collapsed, there would be no hope,” Lyonpo said. “This is the time when we need to give hope to our private sectors. Hope to the people and help build their confidence that we still have adequate energy and power to rescue our economy.”
Amidst speculations that the government would start austerity measures with salary cuts and laying off of people, the government, the finance minister said, would be triggering an economic deflation.
The minister said that drastic measures, if at all needs to be taken, have to be taken only to explore every possible opportunity on a positive note. “Drastic measures don’t necessarily mean laying off employees or cutting down on their allowances and salaries.”
He said that when the country was going through trying times, the objective to sustain and revive the economy was through boosting the consumption capacity. “Instead we have to focus on building the purchasing capacity of individuals and to do this people need to have disposable income with them.”
Lyonpo said that by cutting the income of people in small economies like Bhutan, would trigger an economic deflation. He said that a situation where there are no disruptions in the supply chain but people don’t have the purchasing power would result in a more serious threat for the economy.
“For Bhutan, at this point of time, laying off staff and cutting salaries is not at all a solution. And as a finance minister, it is totally against my principle.”
Hopes on SOEs
Instead, he said that the ministry has asked the state owned enterprises (SOE) to review its mandates and tune it to the current needs, which are appropriate in the ‘new normal’. “We have also asked them to explore additional investment opportunities whereby job creation and employment should be their primary objective.”
He said that one of the biggest impacts of the pandemic would be on employment and the government was aggressively working to ensure everyone gets a job, to keep people engaged and have disposable income.
Besides considering its sustenance, the minister said that the new mandates of the SOEs must be resilient and adaptive to any changes in the future.
However, he said that there was no harm for organisations in preparing for a worse case scenario. “We should have a plan in place to guide us if in case the worst happens,” Lyonpo said. “If we have a plan, we would be more prepared. Otherwise we would land up making irrational decisions.”
He added that it was not necessary that all the contingency plans needed to be executed. “I’m hopeful that our economy will not perform that bad. As a finance minister I can assure we will bring back our economy on track at the earliest possible.”
Covid-19 and the economy
Lyonpo Namgay Tshering said Bhutan cannot escape the impact of the pandemic when the entire global economy was under pressure.
Unlike some complex global economies, Lyonpo said that for Bhutan the idea was simple. The government largely depended on hydropower, tourism and tax for its revenue.
He said that ever since the onset of the pandemic, tourism has zero contribution to the revenue thus far. “The tax revenue will also suffer a significant blow because all businesses are impacted by the pandemic.”
Lyonpo said that the service sector was the largest contributor to the economic slowdown. “The industry sector is also suffering because all the manufacturing and construction works could not pick up because of the Covid-19 containment measures.”
The economy today is at its worst. The country’s Gross Domestic Product (GDP) dropped to its lowest in August registering a growth of negative 6.7 percent. Also in the last five months, the country inflicted economic loss of about Nu 5 billion.
Meanwhile, Lyonpo said that while the government was doing everything possible to revive the economy, it was the responsibility of every individual and organisations to help in bringing back the economy on track.
He said that the government has asked agencies including SOEs to look into optimising the recurrent expenditure and rationalise their spending.
“We are wrecking our brains, consulting with different stakeholders to see how best and at the earliest we can bring our economy back on track. For now, I’m very optimistic.”