Credit: To build on the country’s investment climate and fiscal balance, the World Bank has sanctioned a USD 20M development policy credit.

Development policy credit is a policy-based loan with a grace period of 5 years and 25 years of repayment with 1.25 percent interest with a service charge of 0.75 percent per annum.

The credit has three components, the result of which is expected to achieve by 2017.

Officials from the ministry of finance said that one of the targets is to reduce fiscal deficit below three percent of the GDP. This is also one of the targets in the Annual performance agreement of finance ministry.

A government is said to be running a fiscal deficit when its total expenditure exceeds the revenue it generates, excluding the borrowing. The fiscal deficit this year, as per the budget report is projected at 3.2 of GDP.

Another component of the loan is to reduce the number of days from 32days to 15 days to start a business. This, trade officials said could be done through policy interventions, which is the sole purpose of the loan.

The credit is also expected to establish two new Public Private Partnership (PPP) operations, which are still in consideration.

The credit is also aimed to up the cumulative foreign direct investment from USD 100 million to USD 150 million, by 2017.

According to a press release from the World Bank the credit will help realise Bhutan’s goals of green socio-economic development and self-reliance.

It also states that Bhutan has had an impressive poverty reduction and economic growth record over the past decade. However, high level of investments in the hydroelectric infrastructure has increased pressures on the country’s fiscal balance and external accounts.

“We are excited to work with Bhutan to address current challenges,” Genevieve Boyreau, the World Bank’s Country Representative for Bhutan stated in the press release.

This is the second series of policy credit. The first was provided in 2010 to promote government efficiency and effectiveness through sound fiscal and public financial management, foster private sector development by improving the policy environment and facilitating productive employment opportunities and expand access to infrastructure.

The implementation report of the World Bank stated that overall implementation progress is found to be satisfactory, and program development objectives remain relevant and achievable.

The World Bank meanwhile has currently committed USD 191M in concessional development credits, besides a number of technical assistance grants and analytical work this year.

By Tshering Dorji