When the PDP government took over in 2013, one of its first priorities was to stabilize the economy as it was under severe distress. The GDP growth had slowed to an all-time low of 2.1%, inflation had reached 13.5%, private credit had been frozen for several sectors, import restrictions were in place, foreign reserves had fallen to about US$ 920 million and our total trade value had slowed to about Nu. 85 billion. Therefore, we undertook several initiatives and reforms in collaboration with the private sector and other stakeholders to revive and revitalize our economy.
In the past five years, not only has our economy bounced back but it has also become stronger and more robust. The GDP has grown from Nu. 100 billion in 2013 to Nu. 180 billion today. International institutions such as the World Bank and the ADB have identified our economy as one of the fastest growing in the world. Our GDP growth figures reached as high as 8% in 2016 and about 7% in 2017.
Inflation is under 5%, the total trade value has reached Nu. 104 billion and commensurate with the expansion of the economy, domestic credit has increased from Nu. 57 billion in 2013 to Nu. 105 billion.
One impediment that is regularly cited is lack of access to finance due to high interest rates. Therefore, interest rates were reduced from an average of 13.41% in 2013 to 10.60% in 2017. Such a reduction has translated to savings of Nu 3.2 billion for private businesses.
In parallel, domestic saving has doubled from Nu. 14.8 billion in 2013 to Nu. 28.1 billion. Our foreign exchange reserve has also increased from US$ 920 million to almost US$ 1.2 billion. Of this, Indian Rupee reserve alone stands at Rs. 18.6 billion, a significant improvement since 2012 when the country was still reeling under the impact of the rupee crisis.
A similar vigilance must be overseen with the country’s composition of external debt which in total has increased from Nu. 95 billion in 2013 to Nu. 170 billion today. This has caused concern among some but what needs to be understood is that the increase is because of hydropower loans. Hydro loans increased from Nu. 54 billion to Nu. 132 billion in the 11th Plan mainly on account of a lot of hydropower works been carried out.
Non-hydro loan decreased from Nu. 41 billion to Nu. 37 billion. No debt was taken for the establishment of central schools, procurement of off-road utility vehicles, power tillers and helicopters.
Revenue from taxes almost doubled from Nu. 58 billion in 10th Plan to Nu. 102 billion in the 11th Plan despite reducing or waiving several taxes in the past five years.
We increased the PIT exemption slab from Nu. 100,000 to Nu. 200,000 to benefit the low-income group and exempted tax for rural businesses.
The trade deficit in 2012 was Nu. 24.7 billion or 25% of GDP while in 2017, it was Nu. 29.7 billion or 17.4% of GDP. The trade deficit is still a cause of concern and the only sustainable solution to this situation is to diversify our economy, by building our productive capacity to increase exports and reduce imports.
Bhutan’s Ease of Doing Business ranking improved from 142nd in 2012 to 75th in 2018.
In 2012, there were a total of 13,068 Cottage and Small Industry (CSI) licenses in the country and today there are more than 19,000 licenses. Similarly, in 2012 there were a total of 19,423 trade licenses and today there are more than 40,000 trade licenses. In 2012, there were a total of 381 medium and large industries and today there are 748 such industries.
As of 2012, 30 Foreign Direct Investment (FDI) projects were approved and in the past five years, 38 FDI projects worth Nu. 8.3 billion were approved with 16 projects worth Nu. 1.8 billion having started operations.
In 2013, 116,000 tourists visited Bhutan. Last year alone, we saw arrivals of around 255,000 tourists, which is more than 100% increase in just five years. This growth in tourism brought in additional revenue of Nu. 8.4 billion last year compared to Nu. 5.5 billion in 2013. The industry also created many jobs leading to the number of tour operators increasing to 3,100 from 1,100 in 2012; number of tour guides increasing to 4,000 from 1,900 in 2012 and number of hotels increasing to 1,400 from 900 in 2012.
Gross earnings from hydropower in the 11th Plan amounted to Nu. 75.2 billion compared to Nu. 45.85 billion in the 10th Plan. The earnings increased mainly on account of increase in export tariff. We also increased rhe Tala/Kurichhu export tariff in January 2017 from Nu. 1.98 to Nu. 2.12 per unit. The Chukha tariff also increased, once in 2014 from Nu. 2 to Nu. 2.25 per unit, and to Nu 2.55 per unit in 2018.
Of the Nu. 75.2 billion in earnings, Nu. 17.93 billion was used to pay back the hydro loans. The Kurichhu hydropower loan was also fully paid back in 2016 and Tala hydropower loan will be cleared this year.