{
  "title": "IMF Executive Board Concludes 2024 Article IV Consultation with Bhutan",
  "publication": "IMF News, September 19, 2024",
  "sourceUrl": "https://www.imf.org/en/news/articles/2024/09/19/pr-24336-bhutan-imf-concludes-2024-article-iv-consultation",
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  "summary": "On September 9, 2024, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Bhutan.",
  "publishDate": "2024-09-19",
  "sections": [
    {
      "heading": "Summary",
      "content": "- On September 9, 2024, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Bhutan.\n- Over the past decade Bhutan balanced economic growth and poverty reduction with environmental sustainability, eliminating extreme monetary poverty by 2022.\n- The pandemic hindered development but strong policies limited its health impact."
    },
    {
      "heading": "Recent economic developments (2023–2024)",
      "content": "- Growth remained subdued during 2023.\n- Large-scale emigration and policies to curb imports hindered a more robust recovery.\n- Inflation accelerated in the second half of 2023, driven by wage increases in the public sector.\n- The current account deficit (CAD) widened to around 30 percent of GDP driven by a large investment in crypto assets mining and the slow recovery in tourism.\n- The fiscal deficit narrowed but remained high and non-hydro debt nearly doubled from pre-pandemic levels."
    },
    {
      "heading": "Outlook and projections (medium term)",
      "content": "- Growth is projected to accelerate over the medium term, averaging 6.3 percent of GDP, but to remain volatile, boosted by hydropower projects and grant-financed capital investment.\n- Inflation is expected to gradually ease towards 4 percent as the impact of wage increases subsides.\n- The CAD is expected to narrow, supported by higher electricity exports due to commissioning of new hydropower plants, a continued recovery in tourism, and crypto assets exports.\n- Key medium-term challenge: securing diverse sources of growth that provide quality employment opportunities while preserving Bhutan’s commitment to environmental sustainability."
    },
    {
      "heading": "Risks and vulnerabilities",
      "content": "- Balance of risks tilted to the downside.\n- Domestic risks:\n  - Slippages on implementation of the goods and services tax.\n  - Delays in hydropower projects.\n  - Fiscal risks from materialization of contingent liabilities in the financial sector.\n- External risks:\n  - Volatile commodity prices—particularly of fuel.\n  - Global slowdown that could hinder non-hydro exports.\n- Climate vulnerability given the importance of hydroelectricity and agriculture.\n- Crypto mining entails significant upside and downside risks given their price volatility.\n- Large external debt and persistent CADs—while financing growth-enhancing investments via development partners—remain a source of vulnerability.\n- Upside scenario: stronger-than-envisaged fiscal consolidation would accelerate rebuilding of fiscal and external buffers."
    },
    {
      "heading": "Executive Board assessment and policy recommendations",
      "content": "- Directors agreed with the thrust of staff appraisal and commended poverty and inequality reduction over the last decade.\n- Policy stance recommended:\n  - Tighter fiscal and monetary policies to support the peg, reduce domestic and external imbalances, and rebuild buffers.\n  - Careful management of potential risks stemming from crypto assets operations.\n  - Structural reforms to foster high-quality private sector jobs and diversify the economy.\n  - Continued Fund capacity development support is important.\n- Fiscal policy:\n  - Gradual and sustained fiscal consolidation, based on revenue mobilization and spending restraint, is essential to rebuild buffers and preserve debt sustainability.\n  - Welcome timely implementation of the Goods and Services Tax and additional tax and revenue administration measures to achieve planned fiscal consolidation.\n  - Recommend strengthening public financial management, public investment management, and domestic debt management.\n- Monetary and external sector policy:\n  - Monetary policy needs to be tightened in tandem with fiscal policy to ease balance-of-payment pressures and rebuild reserves.\n  - Need for a well-functioning domestic liquidity management framework to support monetary policy operations.\n  - Encourage phasing out existing exchange restrictions when conditions allow.\n- Financial sector and supervision:\n  - Address remaining financial sector vulnerabilities, especially given expiration of COVID-related support measures.\n  - Welcome new guidelines and regulations to address credit quality and progress toward risk-based supervision.\n  - Recommend further enhancing the AML/CFT framework.\n- Structural and governance reforms:\n  - Improve business environment, strengthen human capital accumulation, improve active labor market policies.\n  - Welcome new FDI policy relaxing some restrictions (including access to foreign currency, local employment requirements, and caps on foreign ownership).\n  - Strengthen public sector governance, including Royal Monetary Authority (RMA) governance framework and independence, and transparency in state-owned enterprises.\n  - Mitigate potential risks from crypto asset operations; welcome RMA’s efforts to strengthen reserve management strategy and forthcoming audited financial statements of crypto-mining operations.\n- Data:\n  - Welcome improvements in data quality and call for further progress."
    },
    {
      "heading": "Selected economic indicators (as reported)",
      "content": "- Nominal GDP (in millions of ngultrums) 1/: 184,660; 187,378; 193,386; 216,239; 237,322; 261,026; 292,837; 325,812; 357,677; 393,607; 438,906\n- Real GDP growth (percent change) 1/: 4.6; -2.5; -3.3; 4.8; 5.0; 5.2; 7.2; 6.4; 5.6\n- Consumer prices (EoP; percent change): 2.8; 4.5; 7.4; 6.5; 3.9; 4.7; 4.4; 4.0\n- Consumer prices (avg; percent change): 3.0; 8.2; 5.9; 4.2\n- Total revenue and grants (percent of GDP): 22.8; 29.1; 30.9; 25.1; 24.2; 28.1; 31.5; 30.1; 28.2; 27.3\n- Domestic revenue (percent of GDP): 18.8; 19.3; 18.5; 18.1; 18.9; 20.3; 20.7; 20.8; 22.4\n- Tax revenue (percent of GDP): 14.7; 12.2; 10.7; 12.0; 13.3; 13.4; 14.0; 14.4; 14.8; 15.2\n- Foreign grants (percent of GDP): 5.5; 8.5; 7.5; 6.2; 8.8; 10.8; 9.4; 4.9\n- Total expenditure (percent of GDP) 2/: 36.6; 32.1; 29.0; 28.8; 32.5; 34.2; 33.4; 32.2\n- Current expenditure (percent of GDP): 15.0; 19.0; 22.5; 15.9; 14.9; 17.1; 17.0; 17.8; 18.7; 19.4\n- Capital expenditure (percent of GDP): 11.8; 14.3; 16.1; 14.2; 15.5; 16.4; 12.8\n- Primary balance (percent of GDP): -0.6; -1.4; -4.8; -5.5; -3.1; -3.0; -2.4; 0.1; 0.2; -0.1; -0.4\n- Overall balance (percent of GDP): -1.5; -1.8; -5.8; -7.0; -4.6; -4.4; -2.7; -3.9\n- General government debt (percent of GDP) 3/: 100; 115; 123; 117; 116; 114; 109; 122; 119; 130\n- Broad money (M2) growth (percent change): 24.4; 9.8; 12.6; 13.2; 12.3; 13.0; 11.5\n- Private credit growth (percent change): 20.5; 9.1; 11.2; 11.1; 10.0; 10.2\n- Current account balance (percent of GDP): -19.2; -14.8; -11.2; -28.1; -34.4; -17.7; -32.1; -20.5; -12.5; -17.1; -14.1\n- Goods balance (percent of GDP): -15.3; -12.1; -6.4; -21.1; -25.7; -12.9; -26.9; -15.0; -6.1; -10.1; -8.8\n- Hydropower exports (percent of GDP): 12.1; 13.5; 11.0; 8.7; 9.5; 10.4; 11.9\n- Imports of goods (percent of GDP): 38.6; 37.1; 33.9; 47.9; 49.2; 40.2; 55.6; 52.4; 45.6; 42.1; 42.2\n- Services balance (percent of GDP): -1.9; -3.5; -6.5; -6.7; -3.7; -2.8; -3.6; -3.8; -8.4; -5.7; -5.0\n- Secondary balance (percent of GDP): 6.6; 5.1; 2.9; 2.1; 2.0; 1.6; 2.5\n- Capital account balance (percent of GDP): 8.0; 7.1; 3.8; 3.6; 3.1; 8.6\n- Financial account balance (percent of GDP): -15.1; -9.1; -8.2; -10.7; -15.9; -24.0; -20.2; -13.6\n- Gross official reserves (in USD millions): 1065; 1344; 1332; 840; 574; 606; 604; 969; 1616.3; 1758.9; 1878.7\n- Gross official reserves (in months of imports): 12.4; 17.5; 17.9; 7.6; 5.8; 5.7; 10.3\n- Gross official reserves (in months of goods and services imports): 10.1; 15.6; 8.1; 8.4\n- Hydropower exports growth rate 4/: -1.2; 105.6; -9.4; -13.2; -20.7; 46.2; 30.4; 26.1\n- Non-hydropower exports growth rate 4/: 13.7; -24.1; 26.8; 16.2; 16.5; 16.0\n- Population in million (eop): 0.7; 0.8\n\nIMF Executive Board press release, September 19, 2024.\n\n---\n\n\n References\n\n- https://www.imf.org/-/media/images/imf/bios/imfboard.jpg\n- The Executive Board\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/2024/09/19/pr-24336-bhutan-imf-concludes-2024-article-iv-consultation"
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    "Published: September 19, 2024",
    "On September 9, 2024, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Bhutan.",
    "Over the past decade Bhutan balanced economic growth and poverty reduction with environmental sustainability, eliminating extreme monetary poverty by 2022.",
    "The pandemic hindered development but strong policies limited its health impact.",
    "Growth remained subdued during 2023.",
    "Large-scale emigration and policies to curb imports hindered a more robust recovery.",
    "Inflation accelerated in the second half of 2023, driven by wage increases in the public sector.",
    "The current account deficit (CAD) widened to around 30 percent of GDP driven by a large investment in crypto assets mining and the slow recovery in tourism.",
    "The fiscal deficit narrowed but remained high and non-hydro debt nearly doubled from pre-pandemic levels.",
    "Growth is projected to accelerate over the medium term, averaging 6.3 percent of GDP, but to remain volatile, boosted by hydropower projects and grant-financed capital investment.",
    "Inflation is expected to gradually ease towards 4 percent as the impact of wage increases subsides.",
    "The CAD is expected to narrow, supported by higher electricity exports due to commissioning of new hydropower plants, a continued recovery in tourism, and crypto assets exports.",
    "Key medium-term challenge: securing diverse sources of growth that provide quality employment opportunities while preserving Bhutan’s commitment to environmental sustainability.",
    "Balance of risks tilted to the downside.",
    "Domestic risks:",
    "External risks:",
    "Climate vulnerability given the importance of hydroelectricity and agriculture.",
    "Crypto mining entails significant upside and downside risks given their price volatility.",
    "Large external debt and persistent CADs—while financing growth-enhancing investments via development partners—remain a source of vulnerability.",
    "Upside scenario: stronger-than-envisaged fiscal consolidation would accelerate rebuilding of fiscal and external buffers.",
    "Directors agreed with the thrust of staff appraisal and commended poverty and inequality reduction over the last decade.",
    "Policy stance recommended:",
    "Fiscal policy:",
    "Monetary and external sector policy:",
    "Financial sector and supervision:",
    "Structural and governance reforms:",
    "Data:",
    "Nominal GDP (in millions of ngultrums) 1/: 184,660; 187,378; 193,386; 216,239; 237,322; 261,026; 292,837; 325,812; 357,677; 393,607; 438,906",
    "Real GDP growth (percent change) 1/: 4.6; -2.5; -3.3; 4.8; 5.0; 5.2; 7.2; 6.4; 5.6",
    "Consumer prices (EoP; percent change): 2.8; 4.5; 7.4; 6.5; 3.9; 4.7; 4.4; 4.0",
    "Consumer prices (avg; percent change): 3.0; 8.2; 5.9; 4.2",
    "Total revenue and grants (percent of GDP): 22.8; 29.1; 30.9; 25.1; 24.2; 28.1; 31.5; 30.1; 28.2; 27.3",
    "Domestic revenue (percent of GDP): 18.8; 19.3; 18.5; 18.1; 18.9; 20.3; 20.7; 20.8; 22.4",
    "Tax revenue (percent of GDP): 14.7; 12.2; 10.7; 12.0; 13.3; 13.4; 14.0; 14.4; 14.8; 15.2",
    "Foreign grants (percent of GDP): 5.5; 8.5; 7.5; 6.2; 8.8; 10.8; 9.4; 4.9",
    "Total expenditure (percent of GDP) 2/: 36.6; 32.1; 29.0; 28.8; 32.5; 34.2; 33.4; 32.2",
    "Current expenditure (percent of GDP): 15.0; 19.0; 22.5; 15.9; 14.9; 17.1; 17.0; 17.8; 18.7; 19.4",
    "Capital expenditure (percent of GDP): 11.8; 14.3; 16.1; 14.2; 15.5; 16.4; 12.8",
    "Primary balance (percent of GDP): -0.6; -1.4; -4.8; -5.5; -3.1; -3.0; -2.4; 0.1; 0.2; -0.1; -0.4",
    "Overall balance (percent of GDP): -1.5; -1.8; -5.8; -7.0; -4.6; -4.4; -2.7; -3.9",
    "General government debt (percent of GDP) 3/: 100; 115; 123; 117; 116; 114; 109; 122; 119; 130",
    "Broad money (M2) growth (percent change): 24.4; 9.8; 12.6; 13.2; 12.3; 13.0; 11.5",
    "Private credit growth (percent change): 20.5; 9.1; 11.2; 11.1; 10.0; 10.2",
    "Current account balance (percent of GDP): -19.2; -14.8; -11.2; -28.1; -34.4; -17.7; -32.1; -20.5; -12.5; -17.1; -14.1",
    "Goods balance (percent of GDP): -15.3; -12.1; -6.4; -21.1; -25.7; -12.9; -26.9; -15.0; -6.1; -10.1; -8.8",
    "Hydropower exports (percent of GDP): 12.1; 13.5; 11.0; 8.7; 9.5; 10.4; 11.9",
    "Imports of goods (percent of GDP): 38.6; 37.1; 33.9; 47.9; 49.2; 40.2; 55.6; 52.4; 45.6; 42.1; 42.2",
    "Services balance (percent of GDP): -1.9; -3.5; -6.5; -6.7; -3.7; -2.8; -3.6; -3.8; -8.4; -5.7; -5.0",
    "Secondary balance (percent of GDP): 6.6; 5.1; 2.9; 2.1; 2.0; 1.6; 2.5",
    "Capital account balance (percent of GDP): 8.0; 7.1; 3.8; 3.6; 3.1; 8.6",
    "Financial account balance (percent of GDP): -15.1; -9.1; -8.2; -10.7; -15.9; -24.0; -20.2; -13.6",
    "Gross official reserves (in USD millions): 1065; 1344; 1332; 840; 574; 606; 604; 969; 1616.3; 1758.9; 1878.7",
    "Gross official reserves (in months of imports): 12.4; 17.5; 17.9; 7.6; 5.8; 5.7; 10.3",
    "Gross official reserves (in months of goods and services imports): 10.1; 15.6; 8.1; 8.4",
    "Hydropower exports growth rate 4/: -1.2; 105.6; -9.4; -13.2; -20.7; 46.2; 30.4; 26.1",
    "Non-hydropower exports growth rate 4/: 13.7; -24.1; 26.8; 16.2; 16.5; 16.0",
    "Population in million (eop): 0.7; 0.8",
    "[https://www.imf.org/-/media/images/imf/bios/imfboard.jpg](https://www.imf.org/-/media/images/imf/bios/imfboard.jpg)",
    "[The Executive Board](https://www.imf.org/external/np/sec/memdir/eds.aspx)",
    "[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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