IMF Executive Board Concludes 2025 Article IV Consultation with Bhutan
IMF News, January 27, 2026
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- Published: January 27, 2026
Social development and environmental stance
- Extreme poverty was eliminated by 2022.
- Inequality has declined.
- Bhutan graduated from the UN’s Least Developed Country category in December 2023, implying a gradual reduction in official development assistance.
- Bhutan maintains more than 60 percent of forest cover and pledges to remain carbon neutral.
Recent economic developments (2024–first half of 2025)
- Economic recovery gained momentum in 2024 and early 2025 with broad-based growth and easing inflation.
- Real GDP growth accelerated to 9.1 percent in Q4 2024 and remained strong in the first half of 2025.
- Key growth drivers: rebound in industry, resilience in services, commissioning of major hydropower projects.
- Inflation trends:
- Declined steadily through most of 2024 and stabilized below 2 percent toward mid-2024.
- Rebounded towards 4 percent in 2025, driven by food inflation.
- Tourism:
- Strategy: “high value, low volume”.
- Tourist arrivals rose by 41 percent.
- Tourism receipts expanded by 35 percent, aided by a growing share of higher-spending non-Indian visitors.
- Vulnerabilities noted: elevated youth unemployment, slower-than-planned capital spending execution, significant structural current account deficit despite improvements.
- Reserves strengthened markedly owing to lower crypto-mining related imports, rising remittances, higher tourism and hydropower earnings.
Medium-term outlook and risks
- Growth is projected at 7.4 percent in FY2025/26 and to remain strong in FY2026/27, reflecting increases in tourism, hydropower exports and capital spending.
- Inflation is projected to converge towards 4 percent.
- Medium-term drivers: rising hydropower generation and continued capital investment.
- Structural challenge: need to expand beyond hydropower and low-productivity activities to create private-sector jobs and reduce youth emigration pressures.
- Key downside risks:
- Delays in hydropower projects.
- Global slowdown weakening tourism and non-hydro exports.
- Declines in value of crypto asset holdings.
- Fuel-price increases.
- Climate-related shocks, including glacial lake outburst floods.
- GMC (Gelephu Mindfulness City) project risks: fiscal and financial risks, potential erosion of national tax base, crowding out of pro-growth public investment, contingent liabilities.
Gelephu Mindfulness City (GMC) — opportunities and risks
- Potential: spearhead economic diversification and spur FDI.
- Risks and concerns:
- Legal framework on labor, goods, and capital mobility is at an early stage and needs further clarity.
- Independent tax regime could erode the national tax base.
- Financial risks from differences between RMA regulations and GMC regulations (regulatory and licensing arbitrage, passporting risks).
- GMC adoption of Abu-Dhabi Global Market regulations helps address AML/CFT vulnerabilities, but complementary laws and strong implementation remain critical.
- Crypto-asset activities permitted in the GMC heighten the need for strong enforcement and supervision.
- Fiscal risks require careful management to protect Bhutan’s revenue base and limit spending pressures.
Policy recommendations and priorities
- Fiscal policy
- Gradual but sustained fiscal consolidation to achieve the authorities’ medium-term deficit target and put public debt on a downward trajectory.
- Maintain commitment to a fiscal deficit of 3 percent over the FYP.
- Strengthen revenue mobilization: higher GST rates and other tax policy measures such as the introduction of fuel taxes.
- Exercise tighter expenditure discipline while preserving space for pro-growth capital spending.
- Properly manage the new financing model for hydropower projects to mitigate fiscal risks.
- Monetary policy and reserves
- Gradually normalize monetary policy to support reserve accumulation.
- Absorb excess liquidity to moderate credit growth and reinforce monetary transmission.
- Implement the domestic liquidity management framework and move toward establishing an interest rate corridor.
- Strengthen monetary policy framework to support reserve accumulation and external adjustment.
- Financial sector resilience
- Adopted Bhutanese accounting standards introducing expected-credit-loss approach requiring higher provisioning, particularly for restructured loans.
- Focus on timely recognition of credit risk, enforcement of prudential norms, and mitigation of concentration risks in tourism and housing.
- Strengthen risk-based supervision, enhance stress testing, and take prompt corrective actions to preserve system soundness.
- Continue efforts to strengthen the AML/CFT framework, including improvements on prosecution and conviction.
- GMC-specific measures
- Clarify legal frameworks governing GMC status and mobility of labor, goods, and capital.
- Close regulatory gaps between RMA and GMC to avoid arbitrage and passporting risks.
- Ensure complementary laws and strong implementation to address AML/CFT vulnerabilities.
Executive Board assessment (high-level)
- Growth expected to remain robust over the medium term supported by hydropower commissioning and continued capital spending, with Punatsangchhu II fully operational and investment under the 13th FYP progressing.
- Inflation projected to stabilize around 4 percent, anchored by the currency peg and high import content of investment.
- Strengthening fiscal and monetary stance is key to reducing external imbalances and building up reserves.
- RMA has taken steps to enhance transparency and governance in reserve management, including a comprehensive internal control assessment of foreign exchange and reserve management systems and working toward implementing Fund capacity development recommendations on reserve management.
Bhutan: Selected Economic Indicators (highlights and exact values)
- National Accounts
- Nominal GDP (in millions of ngultrum) 1/: 2023/24 Act. 260,310; 2024/25 Est. 288,054; 2025/26 Proj. 320,294; 2026/27 Proj. 352,058
- Real GDP growth (percent change) 1/: 2023/24 Act. 4.2; 2024/25 Est. 6.8; 2025/26 Proj. 7.4; 2026/27 Proj. 6.0
- Prices
- Consumer prices (EoP; percent change): 2023/24 1.7; 2024/25 3.3; 2025/26 3.7; 2026/27 4.0
- Consumer prices (avg; percent change): 2023/24 4.3; 2024/25 2.5; 2025/26 3.5; 2026/27 3.8
- GDP deflator (percent change): 2023/24 4.7; 2024/25 3.6
- General Government Accounts (in percent of GDP, otherwise indicated)
- Total revenue and grants: 2023/24 27.0; 2024/25 28.4; 2025/26 32.1; 2026/27 30.7
- Domestic revenue: 2023/24 21.5; 2024/25 21.6; 2025/26 22.6; 2026/27 20.8
- Tax revenue: 2023/24 13.5; 2024/25 15.3; 2025/26 13.6
- Non-tax revenue: 2023/24 8.1; 2024/25 6.3; 2025/26 7.2
- Foreign grants: 2023/24 4.1; 2024/25 8.8; 2025/26 9.3
- Internal and other receipts: 2023/24 1.4; 2024/25 0.8; 2025/26 0.7; 2026/27 0.5
- Total expenditure 2/: 2023/24 27.1; 2024/25 31.0; 2025/26 35.0; 2026/27 34.8
- Current expenditure: 2023/24 16.7; 2024/25 15.9; 2025/26 17.7; 2026/27 18.0
- Capital expenditure: 2023/24 10.3; 2024/25 15.1; 2025/26 17.2; 2026/27 16.8
- Primary expenditure 2/: 2023/24 25.2; 2024/25 29.1; 2025/26 33.1; 2026/27 32.2
- Primary balance: 2023/24 1.8; 2024/25 -0.7; 2025/26 -1.0; 2026/27 -1.5
- Overall balance: 2023/24 -0.2; 2024/25 -2.6; 2025/26 -2.9; 2026/27 -4.1
- General government debt 3/: 2023/24 119; 2024/25 118; 2025/26 123; 2026/27 126
- Domestic: 2023/24 10; 2024/25 16
- External: 2023/24 109; 2024/25 107; 2025/26 112; 2026/27 110
- Monetary Sector
- Broad money (M2) growth (percent change): 2023/24 11.2; 2024/25 12.9
- Private credit growth (percent change): 2023/24 5.6; 2024/25 13.2; 2025/26 11.3; 2026/27 8.5
- Balance of Payments (in percent of GDP unless otherwise indicated)
- Current account balance: 2023/24 -20.7; 2024/25 -19.2; 2025/26 -17.7
- Goods balance: 2023/24 -20.0; 2024/25 -24.7; 2025/26 -18.4; 2026/27 -20.4
- Hydropower exports: 2023/24 5.8; 2024/25 6.9; 2025/26 8.6; 2026/27 8.2
- Non-hydropower exports: 2023/24 9.5; 2024/25 11.5; 2025/26 10.6
- Imports of goods: 2023/24 41.0; 2024/25 47.5; 2025/26 39.8; 2026/27 41.1
- Services balance: 2023/24 1.9; 2024/25 2.7; 2025/26 -0.5; 2026/27 0.3
- Secondary balance: 2023/24 -5.3; 2024/25 -4.9; 2025/26 -4.4
- Capital account balance: 2023/24 2.6; 2024/25 7.7; 2025/26 5.5; 2026/27 5.3
- Financial account balance: 2023/24 7.3; 2024/25 16.3; 2025/26 17.1
- Net errors and omissions: 2023/24 -8.9; 2024/25 -5.9; 2025/26 -12.8
- Gross official reserves (in USD millions): 2023/24 624; 2024/25 801; 2025/26 964; 2026/27 1400
- (In months of goods imports): 2023/24 5.9; 2024/25 9.9
- (In months of goods and services imports): 2023/24 5.0; 2024/25 5.2; 2025/26 6.2; 2026/27 7.9
- Memorandum Items
- Hydropower exports growth rate 4/: 2023/24 -25.5; 2024/25 31.2; 2025/26 39.0
- Non-hydropower exports growth rate 4/: 2023/24 -30.5; 2024/25 78.2; 2025/26 -16.2; 2026/27 0.6
- Hydropower good imports 4/: 2023/24 28.7; 2024/25 147.3; 2025/26 72.1
- Non-hydropower good imports 4/: 2023/24 -11.5; 2024/25 29.6; 2025/26 -15.2; 2026/27 3.9
- Notes from source:
- 1/ The GDP series does not reflect the value added from cryptocurrency mining due to lack of data.
- 2/ The expenditure for FY2020/21 and FY2021/22 includes an estimated amount for income support provided to individuals and loan interest payment support to borrowers financed by the National Resilience Fund.
- 3/ Public and publicly guaranteed debt, including loans for hydropower projects.
- 4/ Nominal growth rates in local currency. No actual data on the breakdown of imports is available. The decompositions are estimates based on reported project spending and assumptions on import shares.
IMF Executive Board press release, January 27, 2026.