A girl checks her mobile phone as her mother prepares vegetables at the market in the capital Thimphu, Bhutan December 11, 2017. REUTERS/Cathal McNaughton/File Photo
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KATHMANDU/NEW DELHI, July 28 (Reuters) – Bhutan is considering several measures to contain negative impacts on the economy from falling foreign exchange reserves, its economic affairs minister said on Thursday, after the government warned inhabitants of possible restrictions on imports.
Like many energy-importing countries in South Asia, Bhutan, which has a population of less than 800,000, is dealing with the effects of soaring oil and grain prices due to the war in Ukraine, as is its economy. is reeling from the impact of the pandemic, including a strict zero-COVID policy that has banned foreign tourists for the past two years.
“Measures are being considered to avoid any serious fallout,” Loknath Sharma, the country’s economic affairs minister, told Reuters, adding that the government was closely monitoring the impact of dwindling foreign exchange reserves.
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However, he declined to say what action might be taken.
Earlier this month, Bhutan increased cash bonuses paid to residents receiving remittances from abroad to 2% of each remittance from 1% previously, as part of its efforts to attract foreign currency foreign.
Foreign exchange reserves fell to $970 million at the end of December from $1.46 billion in April 2021, according to data released by the Royal Bhutan Monetary Authority earlier this month, while total external debt rose to $3.2 billion, from $2.7 billion pre-pandemic.
The government has devised a three-phase plan to deal with the emerging economic situation, the Bhutan Broadcasting Service (BBS) reported on Wednesday, citing Prime Minister Lotay Tshering.
In the first phase, the government will stop importing non-essential products such as snacks and cookies. The second phase would include a ban on imports of larger goods and in the third phase, only the import of essential items will be allowed, BBS reported.
Bhutan, wedged between China and India, owes more than $2.2 billion in debt to India, its main trading partner, and about $1 billion to financial institutions such as the Bank World and the Asian Development Bank.
Bhutan’s imports increased to 90.23 billion ngultrums ($1.13 billion) in 2021 from 66.64 billion ngultrums in 2020, while exports grew at a slower pace, leaving a trade deficit of 32.23 billion ngultrums ($404 million).
Sharma said current foreign exchange reserves would cover imports for about 15 months, fulfilling a constitutional requirement to maintain reserves to cover at least 12 months of imports.
Local traders said rising fuel imports, accounting for almost a fifth of total imports, were a major concern, along with imports of passenger vehicles, while tourism revenue, crucial to the economy, have not yet resumed after two years of the pandemic.
Bhutan announced in June that it would reopen to international tourists from September. Read more
($1 = 79.7570 ngultrums)
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Written by Manoj Kumar; Editing by Susan Fenton
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