By Phurpa Wangmo
As per the IMF estimates, the global economy in 2020 is estimated to contract to -3.3 percent, lower by 6.1 percentage points than 2019.
The unemployed rate almost doubled to 5 percent in 2020 from 2.7 percent in 2019. The youth unemployment crossed 22 percent from 11.9 percent in 2019.
Despite the steep decline in output and the resultant rise in unemployment, the Druk Gyalpo’s Relief Kidu and Economic Contingency Plan have helped alleviate the difficulties. Further, the Government also provided job opportunities through the ECP Program in tourism, agriculture and construction industries.
Around 1300 individuals were deployed under tourism, and 930 under the Build Bhutan Project. In addition, the Accelerated Desuung Integrated Training Programs absorbed a large number of unemployed youth and those displaced due to the pandemic.
Through this training program, about 7,922 people were trained in the general category and 3,947 in the specialized water management category. With the implementation of the various initiatives to respond to COVID-19 and prospects of positive outlook, the employment situation is expected to improve.
Economic Outlook for FY 2021-22
Finance Minister Namgay Tshering said that one year into the pandemic, the growth prospects around the world and in the country still remains highly uncertain. New virus mutation and increasing human fatalities in the region is worrying, even as increasing vaccine coverage lifts sentiments.
As per the IMF estimates, with the anticipated availability of vaccines by summer 2021 and additional fiscal stimulus in a few large economies, the global growth is projected to rebound to 6 percent in 2021.
“In Bhutan, with the mass inoculation and the Government’s expansionary fiscal stance in FY 2021-22, we expect substantial economic recovery in the short to medium term,” the finance minister said.
In addition, the GDP is projected to rebound to 4.2 percent in 2021 reflecting high Government investment through capital spending. 4. The projected growth will be mainly fuelled by investments which accounts for 44 percent of GDP. Further, government expenditure, as the main driver of growth, accounts for 36 percent of GDP.
With conviction, the government is committed to ensuring our economy emerges from the pandemic stronger, more resilient, and creating an economy that uplifts everyone, equally.
National Response to COVID-19
Considering the exceptional circumstances and the need for unconventional strategies to build economic resilience and promote growth, finance minister said the National Resilience Fund (NRF) of Nu. 30 billion has been established as announced to the nation by His Majesty on 12th April, 2020.
The NRF supported the grant of the Druk Gyalpo’s Relief Kidu in the form of income support for individuals directly affected by the pandemic and interest payment support for individuals and business entities. Starting from April 2020 to April 2021, Nu. 12,045.704 million has been disbursed from NRF for income and interest payment supports.
The Druk Gyalpo’s Relief Kidu has granted Nu. 2,863.545 million in monthly income support including De-suung skilling program. About 45,766 individuals received the Kidu, which also include Child Support Kidu of Nu.70.890 million.
As of 30th April 2021, Nu. 9,182.159 million was granted as interest payment support. In addition, Nu 1,880 million was borne by the Financial Service Providers as interest payment support.
The interest payment support granted as Druk Gyalpo’s Relief Kidu provided immediate economic relief to the borrowers during the pandemic and also helped financial sectors to avert the build-up of non-performing loans.
“In view of the ongoing social and economic difficulties encountered by the people due to the pandemic and the uncertainties stemming from regional and global developments, on 22nd April 2021, coinciding with the auspicious occasion of Zhabdrung Kuchoe, His Majesty The King commanded the continuation of the Druk Gyalpo’s Relief Kidu for 15 months, from April 2021 to be sourced from Kidu Fund and Sungchop Fund,” finance minister Namgay Tshering said.
He added that in order to respond to the pandemic, individuals, agencies and development partners have expressed solidarity to combat COVID-19. Acknowledging the overwhelming support, the Government created a COVID-19 Response Fund Account to facilitate deposits from the voluntary contributions made by the general public, business entities and international organizations.
As of 13th May 2021, the total deposit into the Fund is Nu. 122.833 million, of which Nu. 120 million has been used for procurement of COVID-19 test kits.
Under the monetary measures, individuals and business entities benefitted from the bridging loan for business continuity, deferment of loan repayment, and concessional term based working capital to whole-sale distributors, tourism and related business and manufacturing industries. As of December 2020, total of Nu. 3,700 million was sanctioned as bridging and working capital.
As of 6th May, 2021, 81 projects have received the guarantee coverage through the partner banks. Of the 81 projects, 30 were under Agriculture sector, followed by 29 under production & manufacturing (P&M) sector and 22 under service sector spread across 15 Dzongkhags.
The total loan for the projects stands at Nu. 274.500 million with the Government Guarantee Coverage amounting to Nu. 174.120 million.
Total cumulative expenditure for COVID-19 related activities amounts to Nu. 4,644.256 million. The Government also received generous support from development partners such as GoI, UN agencies, JICA, ADB, World Bank and others.
Creating gainful employment
Creating gainful employment for all Bhutanese is the Government’s foremost priority. Therefore, the Government has allocated Nu. 1,557.111 million under the Ministry of Labour and Human Resources.
For the Build Bhutan Project, Nu. 416.578 million has been allocated under the Economic Contingency Plan. To support critical skills development and Youth Engagement for Livelihood and Leadership Program (YELP), Nu. 175.042 million has also been allocated.
The Government will also continue to expand Technical Training Institutes for which Nu. 226.244 million has been allocated. In addition, the Government has also allocated Nu. 44.320 million for training of 500 youths and grant support to Youth Enterprise Development.
Finance Minister Namgay Tshering said the Government in close consultation with RMA is reviewing the existing measures to support targeted interventions for providing adequate credit to the borrowers by exploring the possibility of enhancing the value of collateral, uniform application of asset valuation, and application of differentiated interest rate.
In addition, special treatment of interest deferrals during the pandemic are also being considered.
In FY 2021-22, Nu. 82.960 million has been earmarked for development of electronic customs system, Nu. 44.906 million for Bhutan Integrated Taxation System, Nu. 22.739 million for electronic Government procurement system (e-GP), Nu.32.970 million for the data science project, Nu. 194 million for National Digital Identity and Nu. 160 million for e-PIS.
The total public debt stock as of 31st March 2021 is Nu. 224,909.609 million, accounting for 120.5 percent of GDP.
Of the total public debt, the external debt is Nu. 215,822.826 million and domestic debt is Nu. 9,086.783 million.
The hydropower debt stock is Nu. 160,035.778 million which accounts for 74.2 percent of total external debt. The non-hydro debt is Nu. 55,787.048 million and is about 29.9 percent of GDP.