{
  "title": "IMF Executive Board Concludes 2018 Article IV Consultation with Bhutan",
  "publication": "IMF News, October 30, 2018",
  "sourceUrl": "https://www.imf.org/en/news/articles/2018/10/30/pr18401-bhutan-imf-executive-board-concludes-2018-article-iv-consultation",
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  "summary": "Poverty declined from 12 percent in 2012 to 8.2 percent; extreme poverty fell to 1.5 percent.",
  "publishDate": "2018-10-30",
  "sections": [
    {
      "heading": "Recent performance and milestones",
      "content": "- Poverty declined from 12 percent in 2012 to 8.2 percent; extreme poverty fell to 1.5 percent.\n- Per capita incomes at nearly $3,600 in 2018, up from $1,100 in 2004.\n- Growth averaged 6 percent over the 11th Five Year Plan.\n- FY2018 growth is expected to slow to 5.8 percent from 7.4 percent in FY2017.\n- Inflation around 4¼ percent in December 2017.\n- Current account deficit narrowed from an average of 26 percent of GDP over FY2012-16 to 22.8 percent in FY2017.\n- Reserve cover at 13 months of imports (noted as robust levels)."
    },
    {
      "heading": "Outlook and key risks",
      "content": "- FY2019 growth forecast: 4.8 percent, reflecting a contraction in fiscal spending related to the timing of government transition.\n- Medium-term growth: around 7 – 7½ percent expected as three new hydropower projects come on stream.\n- Medium-term improvements expected in the current account, reserves, and the fiscal position as hydropower projects commence.\n- Domestic risks:\n  - Delays in implementing the goods and services tax (GST).\n  - Delays in completing hydropower projects and lower electricity exports.\n  - Higher fiscal spending in FY2019 and more gradual fiscal consolidation could lift growth above the baseline.\n- External risks:\n  - Weaker growth and higher inflation in India.\n  - Increases in global oil prices.\n- Key policy challenges:\n  - Avoiding a sharp reduction in capital spending.\n  - Timely implementation of the GST.\n  - Prudent management of anticipated hydropower revenues.\n  - Diversifying the economy away from dependence on hydropower generation; access to finance and labor market reforms are core issues."
    },
    {
      "heading": "Executive Board assessment and policy recommendations",
      "content": "- Directors welcomed:\n  - Significant improvements in per capita income and poverty indicators.\n  - Strong economic growth and low inflation.\n  - Progress on structural reforms, especially in access to finance and economic diversification.\n- Concerns and priorities:\n  - External imbalances are declining but remain large.\n  - Key medium-term challenges: domestic revenue mobilization, prudent management of hydropower revenues, maintaining macroeconomic stability, enhancing competitiveness, and further diversifying growth sources.\n- Fiscal policy:\n  - Noted that the FY2019 interim budget implies a sharp fiscal withdrawal and may impact growth.\n  - Given infrastructure needs, Directors called for higher capital expenditure supported by additional domestic revenue and a modest increase in domestic financing.\n  - Welcomed authorities’ commitment to implement a broad-based GST by July 2020 and called for rationalization and gradual curtailment of tax exemptions.\n  - Encouraged development of a domestic public debt market and further strengthening of public financial management.\n  - Commended steps to establish a macroeconomic stabilization fund to manage hydropower revenues and business fluctuations; emphasized transparent and rule-based principles for the fund’s operations.\n- Monetary and exchange rate policy:\n  - Current monetary policy stance considered broadly appropriate.\n  - Welcomed RMA efforts to modernize the monetary policy framework by enhancing liquidity management and forecasting capabilities.\n  - Encouraged establishment of an interest rate corridor and steps to develop the interbank market to support the ngultrum’s peg with the Indian rupee.\n  - Noted that once the framework is fully operational, the minimum lending rate could be abolished.\n  - Directors agreed the exchange rate peg to the Indian rupee remains an appropriate nominal anchor.\n  - Suggested Bhutan’s reserve composition may benefit from a higher share in rupees and encouraged elimination of exchange rate restrictions as soon as macroeconomic conditions allow.\n- Financial sector:\n  - Risk of systemic distress remains low, but the nascent banking sector needs strengthening.\n  - Underlined need to further improve the prudential framework and strengthen oversight to avoid build-up of risks.\n  - Welcomed the priority sector lending program to improve access to finance for cottage and small industries but emphasized need to monitor its performance."
    },
    {
      "heading": "Selected economic indicators (highlights from table)",
      "content": "- Real GDP at market prices (percent change)\n  - 2012/13: 3.6\n  - 2013/14: 4.0\n  - 2014/15: 6.2\n  - 2015/16: 7.3\n  - 2016/17: 7.4\n  - 2017/18 Est.: 5.8\n  - 2018/19 Proj.: 4.8\n- Consumer prices (percent change, period average)\n  - 2012/13: 11.3\n  - 2013/14: 9.6\n  - 2014/15: 7.6\n  - 2015/16: 4.6\n  - 2016/17: 4.9\n  - 2017/18: (noted in text as around 4¼ percent in December 2017)\n- General government (In percent of GDP)\n  - Total revenue and grants\n    - 2012/13: 30.2\n    - 2013/14: 33.6\n    - 2014/15: 28.8\n    - 2015/16: 29.9\n    - 2016/17: 26.7\n    - 2017/18: 31.1\n    - 2018/19: 22.1\n  - Tax revenue\n    - 2012/13: 15.2\n    - 2013/14: 14.4\n    - 2014/15: 14.6\n    - 2015/16: 14.2\n    - 2016/17: 13.6\n    - 2017/18: 14.9\n  - Non-tax revenue\n    - 2012/13: 5.6\n    - 2013/14: 6.3\n    - 2014/15: 5.4\n    - 2015/16: 5.0\n    - 2016/17: (not listed)\n    - 2017/18: (not listed)\n  - Foreign grants\n    - 2012/13: 9.4\n    - 2013/14: 12.7\n    - 2014/15: 7.9\n    - 2015/16: 10.6\n    - 2016/17: 8.1\n    - 2017/18: 9.9\n    - 2018/19: 2.6\n  - Total expenditure and net lending\n    - 2012/13: 34.4\n    - 2013/14: 29.8\n    - 2014/15: 27.3\n    - 2015/16: 30.1\n    - 2016/17: 32.1\n    - 2017/18: 19.9\n  - Current expenditure\n    - 2012/13: 17.8\n    - 2013/14: 16.0\n    - 2014/15: 16.7\n    - 2015/16: 16.3\n    - 2016/17: 15.1\n    - 2017/18: 16.2\n  - Capital expenditure\n    - 2012/13: 18.2\n    - 2013/14: 14.8\n    - 2014/15: 12.3\n    - 2015/16: 15.5\n    - 2016/17: 17.0\n- Overall balance (In percent of GDP)\n  - 2012/13: -4.2\n  - 2013/14: 3.8\n  - 2014/15: 1.5\n  - 2015/16: -1.1\n  - 2016/17: -3.3\n  - 2017/18: -1.0\n  - 2018/19: 2.2\n- Public sector debt (percent of GDP, public and publicly guaranteed debt, including loans for hydropower projects)\n  - 2012/13: 99.9\n  - 2013/14: 96.2\n  - 2014/15: 95.7\n  - 2015/16: 114.2\n  - 2016/17: 106.3\n  - 2017/18: 102.7\n  - 2018/19: 103.9\n- External sector (current account balance, in millions of dollars and percent of GDP)\n  - Current account balance (in millions of dollars)\n    - 2012/13: -470\n    - 2013/14: -483\n    - 2014/15: -574\n    - 2015/16: -621\n    - 2016/17: -547\n    - 2017/18: -597\n    - 2018/19: -426\n  - Current account balance (percent of GDP)\n    - 2012/13: -25.4\n    - 2013/14: -26.4\n    - 2014/15: -28.3\n    - 2015/16: -29.4\n    - 2016/17: -22.8\n    - 2017/18: -15.0\n- Trade balance (in millions of dollars)\n  - 2012/13: -377\n  - 2013/14: -393\n  - 2014/15: -430\n  - 2015/16: -540\n  - 2016/17: -469\n  - 2017/18: -460\n  - 2018/19: -226\n- Exports (goods, in millions of dollars)\n  - 2012/13: 546\n  - 2013/14: 535\n  - 2014/15: 580\n  - 2015/16: 493\n  - 2016/17: 555\n  - 2017/18: 572\n  - 2018/19: 716\n- Imports (goods, in millions of dollars)\n  - 2012/13: -923\n  - 2013/14: -928\n  - 2014/15: -1,010\n  - 2015/16: -1,033\n  - 2016/17: -1,024\n  - 2017/18: -1,031\n  - 2018/19: -942\n- Grants (current transfer, in millions of dollars)\n  - 2012/13: 174\n  - 2013/14: 232\n  - 2014/15: 160\n  - 2015/16: 225\n  - 2016/17: 195\n  - 2017/18: 260\n  - 2018/19: 74\n- Capital and financial account balance (in millions of dollars)\n  - 2012/13: 578\n  - 2013/14: 516\n  - 2014/15: 586\n  - 2015/16: 831\n  - 2016/17: 551\n  - 2017/18: 645\n  - 2018/19: 510\n- Loans (net, in millions of dollars)\n  - 2012/13: 294\n  - 2013/14: 212\n  - 2014/15: 350\n  - 2015/16: 632\n  - 2016/17: 377\n  - 2017/18: 283\n  - 2018/19: 315\n- Gross official reserves (in millions of dollars)\n  - 2012/13: 917\n  - 2013/14: 998\n  - 2014/15: 959\n  - 2015/16: 1,115\n  - 2016/17: 1,226\n  - 2017/18: 1,243\n  - 2018/19: 1,327\n- Gross official reserves (in months of goods and services imports)\n  - 2012/13: 11.9\n  - 2013/14: 11.1\n  - 2014/15: 13.1\n  - 2015/16: 14.3\n  - 2016/17: 16.6\n- External debt (in percent of GDP)\n  - 2012/13: 94.1\n  - 2013/14: 93.6\n  - 2014/15: 94.0\n  - 2015/16: 108.6\n  - 2016/17: 105.4\n  - 2017/18: 107.4\n- Debt service ratio (in percent of G&S exports)\n  - 2012/13: 10.9\n  - 2013/14: 22.8\n  - 2014/15: 18.7\n  - 2015/16: 33.3\n  - 2016/17: 38.0\n- Ngultrum per U.S. dollar (period average)\n  - 2012/13: 54.9\n  - 2013/14: 61.5\n  - 2014/15: 62.1\n  - 2015/16: 66.3\n  - 2016/17: 66.4\n- Memorandum items:\n  - GDP at market prices (in billions of Bhutanese Ngultrum)\n    - 2012/13: 101.4\n    - 2013/14: 112.5\n    - 2014/15: 125.8\n    - 2015/16: 140.4\n    - 2016/17: 159.7\n    - 2017/18: 176.2\n    - 2018/19: 192.6\n  - GDP at market prices (in millions of U.S. dollars)\n    - 2012/13: 1848.7\n    - 2013/14: 1829.5\n    - 2014/15: 2027.6\n    - 2015/16: 2116.7\n    - 2016/17: 2404.6\n    - 2017/18: 2623.6\n    - 2018/19: 2838.6\n  - Electricity exports (in percent of total goods exports)\n    - 2012/13: 34.5\n    - 2013/14: 31.2\n    - 2014/15: 31.4\n    - 2015/16: 32.4\n    - 2016/17: 32.3\n    - 2017/18: 34.3\n    - 2018/19: 40.7\n  - Unemployment rate (in percent) (on a calendar year basis)\n    - 2012/13: 2.1\n    - 2013/14: 2.9\n    - 2014/15: 2.5\n\nIMF Communications Department, October 30, 2018.\n\n---\n\n Content in this bundle\n\n- cr18300\n  - cr18300 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - cr18300 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\n References\n\n- Bhutan and the IMF\n- IMF Policy Advice -- A Factsheet\n- Press Releases\n- PRESS CENTER\n- http://www.imf.org/external/np/sec/misc/qualifiers.htm\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2018/10/30/pr18401-bhutan-imf-executive-board-concludes-2018-article-iv-consultation"
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    "Published: October 30, 2018",
    "Poverty declined from 12 percent in 2012 to 8.2 percent; extreme poverty fell to 1.5 percent.",
    "Per capita incomes at nearly $3,600 in 2018, up from $1,100 in 2004.",
    "Growth averaged 6 percent over the 11th Five Year Plan.",
    "FY2018 growth is expected to slow to 5.8 percent from 7.4 percent in FY2017.",
    "Inflation around 4¼ percent in December 2017.",
    "Current account deficit narrowed from an average of 26 percent of GDP over FY2012-16 to 22.8 percent in FY2017.",
    "Reserve cover at 13 months of imports (noted as robust levels).",
    "FY2019 growth forecast: 4.8 percent, reflecting a contraction in fiscal spending related to the timing of government transition.",
    "Medium-term growth: around 7 – 7½ percent expected as three new hydropower projects come on stream.",
    "Medium-term improvements expected in the current account, reserves, and the fiscal position as hydropower projects commence.",
    "Domestic risks:",
    "External risks:",
    "Key policy challenges:",
    "Directors welcomed:",
    "Concerns and priorities:",
    "Fiscal policy:",
    "Monetary and exchange rate policy:",
    "Financial sector:",
    "Real GDP at market prices (percent change)",
    "Consumer prices (percent change, period average)",
    "General government (In percent of GDP)",
    "Overall balance (In percent of GDP)",
    "Public sector debt (percent of GDP, public and publicly guaranteed debt, including loans for hydropower projects)",
    "External sector (current account balance, in millions of dollars and percent of GDP)",
    "Trade balance (in millions of dollars)",
    "Exports (goods, in millions of dollars)",
    "Imports (goods, in millions of dollars)",
    "Grants (current transfer, in millions of dollars)",
    "Capital and financial account balance (in millions of dollars)",
    "Loans (net, in millions of dollars)",
    "Gross official reserves (in millions of dollars)",
    "Gross official reserves (in months of goods and services imports)",
    "External debt (in percent of GDP)",
    "Debt service ratio (in percent of G&S exports)",
    "Ngultrum per U.S. dollar (period average)",
    "Memorandum items:",
    "**cr18300**",
    "[Bhutan and the IMF](http://www.imf.org/external/country/BTN/index.htm)",
    "[IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)",
    "[Press Releases](https://www.imf.org/en/news/searchnews)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[http://www.imf.org/external/np/sec/misc/qualifiers.htm](http://www.imf.org/external/np/sec/misc/qualifiers.htm)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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