In an effort to maintain a minimum foreign currency reserve sufficient to cover essential imports for a period of 12 months, the Ministry of Finance issued a notification on August 16th. The notification announces the extension of the moratorium on vehicle imports for an additional six months, from August 18, 2023, to February 17, 2024. The initial ban on vehicle imports was imposed on August 18, 2022, with an original end date set for December 2022. However, due to slow economic recovery, the moratorium was extended until August 2023.
The notification outlines specific categories of vehicles that will remain exempt from this moratorium. Utility vehicles, heavy earthmoving machines, and agricultural machinery fall within this exempted category. Notably, utility vehicles valued at less than Nu. 1,500,000 or the equivalent of USD 20,000 (whichever is lower) will be permitted.
Vehicles intended for the advancement and promotion of the tourism industry will also continue to be exempt from the moratorium. The Department of Tourism will determine the detailed terms, conditions, and specific types/quantities of vehicles eligible for this exemption.
Furthermore, public transportation vehicles, including taxis and buses, whether powered by fossil fuels or electricity, will retain their exemption from this import moratorium.
Recognizing the significant impact of the vehicle import moratorium on the business continuity of authorized vehicle dealers, the Ministry of Finance has collaborated with the Royal Monetary Authority of Bhutan to devise relief measures. These measures are designed to provide necessary support during the moratorium period.
The relief measures include the deferment of loan repayments to authorized vehicle dealers until the moratorium is lifted, and exploring the possibility of providing soft working capital at a concessional rate of interest to cover business operating expenses until the moratorium is lifted.
The General Manager of Kia Motors stated, “We have successfully sustained ourselves for the past year using our savings, but these funds are now nearing depletion. To ensure our ongoing operations, we humbly request the opportunity to import a minimum of 30 units of non-utility vehicles each month. Without this, we may regrettably be forced to consider staff reductions due to the substantial overhead costs we bear, including salaries, rentals, utility bills, and the upkeep of our offices in Phuentsholing. Our company currently employs approximately 80 dedicated staff members.”
Similarly, Kuenley Tshering, the Marketing Manager of Bhutan Hyundai, expressed his anticipation of resuming imports, only to be met with the unfortunate news of a government-mandated 6-month extension on the vehicle import ban.
The implications of this extension are profound, particularly as the company employs more than 30 staff members. Unfortunately, the only viable course of action appears to be reducing human resources costs. However, this decision could further exacerbate the growing issue of youth unemployment, placing an additional burden on society.
“In light of these challenges, we earnestly appeal to the government to consider granting us the privilege of importing 10-15 vehicles per month. Alternatively, the government could provide financial incentives to vehicle dealers to support our operating costs. This measured allowance would not only aid in expense reduction but also extend valuable support to the youths (employees),” Kuenley added.
Jigme Lhendup, a 39-year-old resident of Thimphu, expressed his acceptance of the situation, stating, “While I had plans to purchase a new car, I hold deep respect for the government’s decision to extend the vehicle import moratorium for another six months. During this period, I’m prepared to adapt and rely on city buses and taxis for my travels, but during emergencies, this seems difficult.”
However, the sentiment isn’t universal. Leki, hailing from Lhuentse and currently residing in Thimphu, commended the government’s decision while raising concern regarding the sale of second-hand cars. Leki emphasized that, while the government’s focus on curbing imports is commendable, there’s a need to consider the challenges faced by those who rely on second-hand vehicles.
“Many of us encounter difficulties in securing transportation, particularly during late hours and emergencies. At such times, having a personal vehicle becomes crucial,” Leki said. He pointed out that the cost of second-hand cars often exceeds that of new vehicles, making it a financial burden rather than an affordable solution. “I once contemplated purchasing a used car, but the price was unexpectedly higher than that of a brand-new model. This compelled me to reconsider and opt for a new car that offered better value,” Leki explained.
“We respect the government’s decision to extend the vehicle import moratorium, but we would also appreciate it if the government could consider establishing realistic pricing for second-hand cars. While we are open to purchasing second-hand cars, the current rates are often higher than those of new cars, making it financially challenging. This situation becomes particularly inconvenient when we have a newborn child and school-going kids,” commented Dorji, a father of three.
“Meanwhile, the government could provide incentives or facilitate the buying and selling of second-hand cars within the country, thereby promoting internal trade without the involvement of foreign currencies,” suggested Phuntsho.
The revised minimum foreign currency reserve required to cover a year’s worth of essential imports came into effect after the government revised the foreign currency reserve to meet the 12 months of essential imports on February 13, 2023, following the recommendations submitted by the independent review committee. The Constitution mandates the State to maintain foreign currency reserves to cover at least 12 months of essential imports.
Meanwhile, the Ministry of Finance and the Royal Monetary Authority of Bhutan are closely evaluating a gradual lifting of the moratorium, with plans to inform the public of the same in due course.