By Tandin Wangchuk
As the pandemic shows no signs of slowing down, the Prime Minister’s office issued a news release this week announcing the loan deferment whereby individuals affected by the COVID-19 pandemic can choose to defer loan repayments until June next year.
According to the news release, all loans sanctioned as of June 30 last year shall be eligible for the deferment of loan repayment for another year, from July this year to June next year.
A press release from the Prime Minister’s Office stated that the COVID-19 pandemic continues to pose serious risks to the health and livelihood of our people. The containment measures and lockdowns have adversely affected everyday life and business, creating economic hardship.
“In order to mitigate the impact, build resilience and give confidence and security to our people, His Majesty The King commanded at the very start of the pandemic that the State must extend substantive, timely and inclusive support to affected citizens and communities,” the press release stated.
However, the statement revealed that depending on the borrowers’ repayment capacity, Financial Service Providers (FSP) may extend the loan tenure by postponed periods or up to five years to relieve the burden of loan repayment on the borrowers.
And regular repayments during the deferment periods, on the other hand, will be rewarded with incentives. Borrowers who pay their loan instalments throughout the deferment period will receive a one per cent interest decrease on their term loans for another year from the FSPs.
In the case of loans, the FSPs may lend up to 100 per cent of the collateral value within the Loan-To-Value limit. For instance, in the case of a loan for purchase or construction of a second or any subsequent property, LTV shall not exceed 70 per cent of the value of the property.
The LTV restrictions for housing and vehicle loans, however, would stay unchanged. In addition, the FSPs may use uniform land rates for valuation purposes if they agree on a modality.
In addition, the government also extended fiscal measures until December this year. It is to ensure sustained economic stability and support resilient recovery. Some of the fiscal measures include deferring CIT/BIT and deferring the payment for electricity charges for the industries on a case by case basis. WiFi and electricity will be provided free of charge to the hotels used as quarantine facilities, waiver of payment of monthly rent and other charges for tourism-related business entities leasing government properties will continue until December 2021 are some of the other measures.
The news release states that the government will review the effectiveness of the fiscal measures by December and extend based on the situation of the pandemic.
Close to 140,000 loan account holders are benefitted from the Loan Interest Payment Support under Druk Gyalpo’s Relief Kidu.
In addition, Lyonchhen said the Druk Gyalpo’s Relief Kidu (DGRK) in the form of Income Support and Loan Interest Payment Support were provided for the last twelve months (April 2020 to March 2021). It is being continued for another fifteen months until June 2022.
“While the DGRK has been the most effective form of intervention to the general public, conventional forms of monetary measures have also complemented the Royal Kidu in shielding the individual borrowers and business entities from the consequences of the prolonged pandemic,” he said.
Further, as there is no sign of the pandemic or its consequences abating anytime soon, some key monetary and fiscal measures that shall be continued includes the continuation of deferment of loan repayments.
It also stated that the FSPs shall not capitalize the interest accrued during the deferment period. The total accumulated interest from April 2020 to June 2022 shall be payable in equal installments after the end of the deferment period.
Further, it was stated that the FSPs shall provide gestation for another one year until June 2022 for the Bridging Loans or Soft Term Loans granted to the business entities under the Phase II Monetary Measures.
“The FSPs shall not capitalize the interest accrued during the gestation period. The total accumulated interest from April 2020 to June 2022 shall be payable in equal installments after the end of the gestation period,” the statement from the PMO read.
𝐅𝐢𝐬𝐜𝐚𝐥 𝐌𝐞𝐚𝐬𝐮𝐫𝐞𝐬 (𝐉𝐮𝐥-𝐃𝐞𝐜 𝟐𝟎𝟐𝟏)
In order to ensure sustained economic stability and support resilient recovery, the government stated that it has allocated one of the highest capital budget at 33 percent of the 12 FYP capital outlay for the Fiscal year 2021-22.
In addition, following fiscal measures will be extended during the period July to December, 2021.
Income tax deferral for income year 2019 for tourism and allied sectors including entertainment sector shall be considered on a case by case basis upon application for the period July to December, 2021. In order to enable business entities to settle CIT & BIT outstanding, installment payment of incomes tax shall be extended to the business entities.
Industries shall continue to pay demand charges based on actual consumption for the period July to December, 2021. Payment of electricity charge for industries shall be considered for deferral on a case by case basis upon application.
In order to ensure that the deferrals are targeted towards industries actually impacted by the current situation, the MoEA and MoF shall verify the eligibility criteria during the extended period.
Electricity & WiFi charges for Hotels used as quarantine facility: WiFi and electricity shall be provided free of charges to the hotels used as quarantine facility up to December 2021.
Waiver of payment of monthly rent and other charges: As the tourism and the aviation sectors continue to be severely impacted, waiver of payment of monthly rent and other charges for tourism related business entities leasing government property shall be continued up to December 2021.
Further, the PMO stated that the rationalization and simplification of customs duty has been passed by the 4th session of the 3rd Parliament as ‘Customs Duty Act 2021’. The implementation of the revised customs duty is expected to stimulate economic activities, promote export and contain inflation.
It also stated that the existing fiscal incentives expire by December 31, 2021. “In this regard, the Government will review the existing fiscal incentives and propose revision of incentives to ensure business continuity and stability besides supporting a resilient economic recovery,” it stated.
Meanwhile, the effectiveness of the fiscal measures will be reviewed by December 2021 and extended based on the situation of the pandemic.