IMF projects higher growth for Bhutan

Despite the slowdown in construction of hydropower projects int the country, the International Monetary Fund (IMF) in its new economic outlook has projected Bhutan’s growth in 2019 at 5.5 percent and 7.2 percent in 2020. This is better than earlier projection by 1%.

However, the report highlighted the underlying increasing trend of external debts that may have negative impact on growth continuity.  The country’s external debt has reached Nu 188 billion as of June this year – 114 percent of the GDP.

According to Royal Monetary Authority (RMA, 73% or Nu 138 billions of this total debt is attributed to Rupee debt taken for hydropower projects whereas loans from World Bank, Asian Development Bank, IFAD, JIFA and other governments accounts to Nu 4.9 billions. 

While the concern on mounting external debt is growing, the IMF says that Bhutan’s risk of debt distress is modest.

In a press briefing in Washington DC, IMF Deputy Director, Asia and Pacific Department Anne-Marie Gulde-Wolf said ‘growth in Bhutan is very much dependent on exports, exports of hydroelectricity, and the hydroelectricity is going to India and the construction activity is related to investments by the Government of India. So the growth activities depend very much on implementation of these projects.’

“So my colleagues who were looking at the implementation and the impact on growth felt that the growth activity was stronger, somewhat stronger than at the time of the last forecast. Sometimes this is not necessarily immediately visible on the ground, but from the data we have seen that there was a pickup of that growth. So to come back to your question of how should you measure economic output in Bhutan, clearly in an economy that is export-oriented this really gives only one aspect of how the economy is doing and how it translates to the population at large,” she said.