Prime Minister Dr Lotay Tshering says the country’s dollar reserve would last only about 15 months from now if the country’s economic situation doesn’t improve. He said this to public servants and locals during his recent visit to Bumthang. As an import-driven economy, this means the country could end up with no dollars to import essentials including fuel. The economy is reeling under the pressure of the COVID situation coupled with the economic fallout from the Russia-Ukraine war.
Meetings after meetings, yet the Prime Minister’s message to the civil servants, local leaders and the public are the same. It is that the country’s economic crisis has heightened over the last two years or so.
“The impact the Russia-Ukraine war will have on our economy can be assessed by walking into a grocery store. If the grocery store has more commodities that are made in Bhutan, then the war in Europe won’t affect us much. More the commodities are imported, more impact will be coming on us. As of now we are maximally import dependent,” said the Prime Minister.
He also said that the government has designed three phases of interventions which will be implemented depending on the economic situation.
In the first phase, the government will stop importing non-essential commodities such as snacks and biscuits. The second phase consists of goods which are important but could be disallowed from being imported. In the third phase, only the essential items will be allowed to import.
“We are in a difficult time now. Should you be very worried? I don’t think so but you should be cautious about the impending situation. And when the government comes up with new measures and if they don’t please you, you should understand that the economy is worsening. If we don’t inform the people about the situation right now, I feel that I’m failing as a Prime Minister.”
He also said that the government received proposals from a few ministries and the private sector to provide fuel subsidies. However, he said short-term measures such as providing subsidies could lead to catastrophes a few decades from now.
Fuel prices in the country have hit an all-time high in recent months before falling by some margin about a week ago.
“If the people want the fuel at Nu 80 when the market price is Nu 120, the government will have to pay the extra Nu 40. We can do that if people want us to do so but we will have no money left to import essential items such as salt, rice and cooking oil in the next four to five months. That’s why I told people to walk if they have become incapable of filling up their cars. It’s matter-of-fact and I’m being honest.”
The country’s dollar reserve has fallen to around USD 850 M from around USD 1.3bn about two years ago. Exports have been minimal and the government had to spend around Nu 11bn to combat the pandemic.
The PHPA I and Kholongchhu hydropower projects are in limbo while food and fuel prices are spiralling. However, the Asian Development Bank projects a 4.5 per cent GDP growth this year.
Kipchu, Bumthang
