Abstract
This 2014 Article IV Consultation highlights that the GDP growth in Bhutan has slowed from about 10 percent in FY2011 (July 1–June 30) to 5 percent in FY2013. Slower growth reflects policy efforts to contain overheating pressures in the form of restrictions on credit for construction and vehicle. Inflation has remained elevated, tracking closely that of India (Bhutan’s main trading partner). Social development indicators have improved steadily, and Bhutan is on track or has achieved most of its Millennium Development Goals. Growth is projected to recover to 6½ percent in FY2014, driven mainly by a pick-up in hydropower-related construction activities and domestic services.
Fund Relations
(As of April 30, 2014)
Membership Status:
Joined: September 28, 1981; Article XIV.
General Resources Account
| SDR Million | % Quota | |
|---|---|---|
| Quota | 6.30 | 100.00 |
| Fund Holdings of Currency (Exchange Rate) | 5.28 | 83.81 |
| Reserve Tranche Position | 1.02 | 16.20 |
| Lending to the Fund | ||
| SDR Million | % Quota | |
|---|---|---|
| Quota | 6.30 | 100.00 |
| Fund Holdings of Currency (Exchange Rate) | 5.28 | 83.81 |
| Reserve Tranche Position | 1.02 | 16.20 |
| Lending to the Fund | ||
SDR Department:
| SDR Million | % Allocation | |
|---|---|---|
| Net cumulative allocation | 5.99 | 100.00 |
| Holdings | 6.43 | 107.35 |
| SDR Million | % Allocation | |
|---|---|---|
| Net cumulative allocation | 5.99 | 100.00 |
| Holdings | 6.43 | 107.35 |
Outstanding Purchases and Loans: None
Latest Financial Arrangements: None
Projected Payments to Fund 1/
(SDR million; based on existing use of resources and present holdings of SDRs):
When a member has overdue financial obligations outstanding for more than three months, the amount of such arrears will be shown in this section.
Projected Payments to Fund 1/
(SDR million; based on existing use of resources and present holdings of SDRs):
| Forthcoming | |||||
|---|---|---|---|---|---|
| 2014 | 2015 | 2016 | 2017 | 2018 | |
| Principal | |||||
| Charges/interest | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| Total | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
When a member has overdue financial obligations outstanding for more than three months, the amount of such arrears will be shown in this section.
Projected Payments to Fund 1/
(SDR million; based on existing use of resources and present holdings of SDRs):
| Forthcoming | |||||
|---|---|---|---|---|---|
| 2014 | 2015 | 2016 | 2017 | 2018 | |
| Principal | |||||
| Charges/interest | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| Total | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
When a member has overdue financial obligations outstanding for more than three months, the amount of such arrears will be shown in this section.
Implementation of HIPC Initiative: Not Applicable
Implementation of Multilateral Debt Relief Initiative (MDRI): Not Applicable
Implementation of Post-Catastrophe Debt Relief (PCDR): Not Applicable
Exchange System
Since its introduction in 1974, the ngultrum has been pegged to the Indian rupee at par. Bhutan continues to avail itself of transitional arrangements under Article XIV, Section 2, pursuant to which it maintains exchange restrictions in connection with: (i) the availability of foreign exchange for travel, except for medical travel abroad by Bhutanese citizens1, invisibles2, and private transfers3; (ii) foreign exchange balancing requirement on remittances of income in convertible currencies or other foreign currencies from FDI; and (iii) the availability of foreign exchange for importers who are not able to provide the identity of the seller.
Bhutan also maintains exchange restrictions subject to Fund approval under Article VIII, Section 2(a) in connection with: (i) the FX balancing requirements for imports of capital goods (for projects involving FDI) and primary raw materials (for certain industrial projects); (ii) banning residents who do not comply with the requirement to repatriate export proceeds from accessing foreign exchange for unrelated imports; (iii) requiring foreign direct investment businesses to pay for their establishment and operational expenses from their own convertible currency resources; (iv) requiring Bhutanese companies to pay the interest on and amortization of external loans from their own convertible currency resources; (v) restricting the availability of Indian rupee for making payments and transfers to India in the following current international transactions: personal and business travel and study-abroad living arrangement4, family5 and salary remittances6, advance payments for imports from India7 and to recruit Indian workers8, imports of certain construction materials and vehicles from India9; and (vi) banning the access to Indian rupee for unrelated current international transactions for those who contravene RMA ‘s 2012 guidelines on Indian rupee transactions.10
Staff is in the process of assessing other measures imposed by the authorities with respect to their consistency with Bhutan’s obligations under Art VIII, Section 2(a) and 3.
Article IV Consultation
Bhutan is on a 24-month consultation cycle. The 2011 Article IV consultation was concluded by the Executive Board on May 27, 2011.
Technical Assistance
| Fiscal (FAD): | |||||
| 1982, 1983 | - | Tax policy, budgeting, and accounting | |||
| 1984 | - | Tax legislation | |||
| 1984–86, 1988–89 | - | Technical experts assigned as General Fiscal Advisor to the Ministry of Finance | |||
| 1987, 1989 | - | Tax system and public enterprises | |||
| 1992, 2003 | - | Income taxation | |||
| 2003 | - | Workshop on tax auditing and revenue forecast | |||
| 2004 | - | Accounting (with MFD) | |||
| 2009 | - | Indirect tax system, scope for VAT introduction | |||
| 2009 | - | Sales tax/VAT | |||
| 2012 | - | Diagnostic mission on budget preparation | |||
| 2012, 2013 | - | Assistance for cash flow forecasting and cash management | |||
| 2013 | - | Capacity building on budget analysis through structured management review | |||
| 2013 | - | Treasury management | |||
| 2013 | - | Treasury diagnostic | |||
| 2013, 2014 | - | Macrofiscal capacity building | |||
| 2013, 2014 | - | Budget planning and analysis | |||
| Legal (LEG): | |||||
| 1982–84 | - | Tax legislation | |||
| 2004, 2005 | - | Central banking and financial services legislation and foreign exchange regulations (with MFD) | |||
| 2011 | - | TA in Payments Law | |||
| Monetary and Financial (CBD/MAE/MFD/MCM): | |||||
| 1983 | - | Set-up the Royal Monetary Authority (RMA) | |||
| 1980–92 | - | Technical experts assigned as General Advisors to RMA | |||
| 1989 | - | Financial system review | |||
| 1991 | - | Financial sector legislation/development of supervisory capabilities | |||
| - | Technical experts assigned as Advisor for Bank Supervision | ||||
| 1992 | - | Issuance of government securities | |||
| 1993–96 | - | Implementation of issuance of government securities | |||
| 2003 | - | Monetary and exchange operations / financial systems | |||
| 2004 | - | Accounting | |||
| 2004, 2005 | Central banking and financial services legislation and foreign exchange regulations | ||||
| 2005, 2007 | - | Risk based internal audit policies and practices | |||
| 2006, 2007 | - | Implementation of accounting reforms Debt management and financial markets development | |||
| 2007 | - | Follow-up on excess liquidity issues | |||
| - | Follow-up on reserve management | ||||
| 2008 | - | Foreign exchange issues | |||
| 2013 | - | Enhancing financial sector surveillance | |||
| 2013 | - | Treasury and reserve management | |||
| Statistics (STA): | |||||
| 1988 | - | Trade statistics | |||
| 1990 | - | Statistics database | |||
| 2004 | - | Multisector statistics/GDDS mission | |||
| 2005, 2009, 2011, 2013 | - | Balance of payments statistics | |||
| 2010 | - | GDDS: Metadata Development | |||
| 2011, 2012 | - | JSA ICP: Producer Price Index | |||
| 2012 | - | Module management/oversight | |||
| 2012 | - | National Accounts - Quarterly | |||
| 2011, 2013 | - | JSA ICP-SNA: Quarterly National Accounts | |||
| 2013 | - | Government Finance Statistics | |||
| 2013 | - | Consumer Price Index | |||
| 2013 | - | Assessment/Evaluation | |||
| Fiscal (FAD): | |||||
| 1982, 1983 | - | Tax policy, budgeting, and accounting | |||
| 1984 | - | Tax legislation | |||
| 1984–86, 1988–89 | - | Technical experts assigned as General Fiscal Advisor to the Ministry of Finance | |||
| 1987, 1989 | - | Tax system and public enterprises | |||
| 1992, 2003 | - | Income taxation | |||
| 2003 | - | Workshop on tax auditing and revenue forecast | |||
| 2004 | - | Accounting (with MFD) | |||
| 2009 | - | Indirect tax system, scope for VAT introduction | |||
| 2009 | - | Sales tax/VAT | |||
| 2012 | - | Diagnostic mission on budget preparation | |||
| 2012, 2013 | - | Assistance for cash flow forecasting and cash management | |||
| 2013 | - | Capacity building on budget analysis through structured management review | |||
| 2013 | - | Treasury management | |||
| 2013 | - | Treasury diagnostic | |||
| 2013, 2014 | - | Macrofiscal capacity building | |||
| 2013, 2014 | - | Budget planning and analysis | |||
| Legal (LEG): | |||||
| 1982–84 | - | Tax legislation | |||
| 2004, 2005 | - | Central banking and financial services legislation and foreign exchange regulations (with MFD) | |||
| 2011 | - | TA in Payments Law | |||
| Monetary and Financial (CBD/MAE/MFD/MCM): | |||||
| 1983 | - | Set-up the Royal Monetary Authority (RMA) | |||
| 1980–92 | - | Technical experts assigned as General Advisors to RMA | |||
| 1989 | - | Financial system review | |||
| 1991 | - | Financial sector legislation/development of supervisory capabilities | |||
| - | Technical experts assigned as Advisor for Bank Supervision | ||||
| 1992 | - | Issuance of government securities | |||
| 1993–96 | - | Implementation of issuance of government securities | |||
| 2003 | - | Monetary and exchange operations / financial systems | |||
| 2004 | - | Accounting | |||
| 2004, 2005 | Central banking and financial services legislation and foreign exchange regulations | ||||
| 2005, 2007 | - | Risk based internal audit policies and practices | |||
| 2006, 2007 | - | Implementation of accounting reforms Debt management and financial markets development | |||
| 2007 | - | Follow-up on excess liquidity issues | |||
| - | Follow-up on reserve management | ||||
| 2008 | - | Foreign exchange issues | |||
| 2013 | - | Enhancing financial sector surveillance | |||
| 2013 | - | Treasury and reserve management | |||
| Statistics (STA): | |||||
| 1988 | - | Trade statistics | |||
| 1990 | - | Statistics database | |||
| 2004 | - | Multisector statistics/GDDS mission | |||
| 2005, 2009, 2011, 2013 | - | Balance of payments statistics | |||
| 2010 | - | GDDS: Metadata Development | |||
| 2011, 2012 | - | JSA ICP: Producer Price Index | |||
| 2012 | - | Module management/oversight | |||
| 2012 | - | National Accounts - Quarterly | |||
| 2011, 2013 | - | JSA ICP-SNA: Quarterly National Accounts | |||
| 2013 | - | Government Finance Statistics | |||
| 2013 | - | Consumer Price Index | |||
| 2013 | - | Assessment/Evaluation | |||
Resident Representative/Advisor: None.
Relations with the World Bank Group
(As of March 2014)
The National Assembly finalized the Eleventh Five-Year Plan (11FYP) (2013–2018) in October 2013. The government shall focus on Self Reliance and Inclusive Green Socio-economic Development in the Eleventh Five year Plan. Self-Reliance is interpreted as “ability to meet all national development needs as articulated through 5 year plans by 2020” and Inclusive development refers to “reducing poverty and inequality by enhancing the standard of living and the quality of life of the most vulnerable sections of the society”.
World Bank Group’s Country Partnership Strategy
The current joint World Bank/IFC-Bhutan Country Partnership Strategy (CPS) covers the period FY11–14. It is aligned with three key strategic frameworks – the Principles of Gross National Happiness (GNH); Bhutan 2020 Vision and the Tenth Five-Year Plan (2008–2013). The CPS has two areas of engagement: (i) Economic Diversification, Job Creation and Financial Inclusion and (ii) Spatial Planning and Public Services, with two cross-cutting themes: capacity building and environmental sustainability.
The next CPS is scheduled to begin in FY 2015. It is anticipated that many of the themes of the current CPS will continue to resonate. The bulk of IDA financing is expected to continue in the form of development policy lending, supplemented by a limited number of specific investments in key areas, particularly where IDA resources may be leveraged, and a robust knowledge program. The next CPS probably will also reflect a shift toward IDA-IBRD blend status for Bhutan, in keeping with Bhutan’s emerging middle-income country (MIC) status.
International Development Association (IDA)
Lending Program
The World Bank provides around $15–20 million of new IDA resources per year. There are four ongoing specific investment operations for a net commitment of $82 million of IDA resources. These include three country specific IDA operations – Decentralized Rural Development, Urban Development II, Remote Rural Communities Development – one regional IDA project – Regional Cooperation on Wildlife Protection – and one GEF grant operation – Sustainable Financing for Biodiversity Conservation. An additional financial project for the Urban Development II is being prepared. In addition, the WB manages several grants for Bhutan on Disaster Management, Public Private Partnerships, Corporate Governance, Public Financial Management and inter-governmental fiscal relations, Urban Budget Processes, social protection.
The World Bank has extended three development policy operations over the last six years. The most recent, Development Policy Credit-2 (DPC-2) was approved by the World Bank’s Board of Executive Directors in November 2012 for a total of $36 million. This operation has focused on
(i) Promoting government efficiency and effectiveness through sound fiscal and public financial management and procurement, and strong public administration;
(ii) Fostering private-sector development by improving the policy environment and facilitating productive employment opportunities; and
(iii) Expanding access to infrastructure in a sustainable manner.
Non- lending Program
The World Bank provides support on knowledge through analytical work and technical assistance. Recent analytic work includes Gender Policy Note, a Nutrition Assessment, a Poverty and Social Impact Analysis of the proposed Bill on Cultural Heritage, a Human Development Public Expenditure Review, a review of higher education, and an Investment Climate Assessment which served to underpin the most recent budget support operation (DPC-2) to improve the policy framework governing private sector development. A poverty assessment, Financial Sector Assessment and a green growth study are underway, as well as a financial sector technical assistance to support the design of a financial sector strategy.
International Finance Corporation (IFC)
The IFC has a total committed investment portfolio in Bhutan of over $31 million. The portfolio consists predominantly of IFC’s recent equity participation in Bhutan National Bank. The advisory portfolio includes advice in structuring Public Private Partnerships (PPPs), improving Bhutan’s investment climate and enhancing access to financial services. IFC continues to explore areas of assistance in hydropower, tourism, manufacturing, agribusiness, health and education sectors among others. IFC’s advisory support on investment climate reforms, PPP development and the financial sector is expected to continue.
Multilateral Investment Guarantee Agency (MIGA)
In January 2013, Bhutan took the first step to becoming a member of MIGA by signing the MIGA Convention. The Convention has been ratified by the National Assembly and the National Council. Bhutan is currently in the process of completing the other requirements for membership. Upon completion of the membership process, MIGA will be able to support investments in Bhutan by providing guarantees.
Relations with the Asian Development Bank
Bhutan became a member in 1982 and ADB began its lending operations to the country in 1983. Bhutan is classified as a Group A country and is eligible for the Asian Development Fund (ADF) resources. Classified as moderately debt stressed, Bhutan has been receiving a 50:50 mix of ADF loan and ADF grant assistance since 2011. Cost-sharing ceiling has been set at 99 percent for loans, technical assistance, and other grants.
ADB assistance has followed closely Bhutan’s Five Year Plans (FYP) and been guided by ADB’s country partnership strategies (CPS) and country operations business plans (COBP). ADB is currently preparing a new CPS for the period 2014–2018, in line with the government’s Eleventh FYP (2013–2018) and Strategy 2020—ADB’s Long-Term Strategic Framework, 2008–2020. The overarching goal of the previous CPS, 2006–2010 and interim CPS, 2012-2013 was poverty reduction through economic diversification, and the core sectors of ADB operations were energy (including rural electrification and renewable energy), finance, transport, and urban development. The country assistance program evaluation, conducted in 2010, rated ADB country operations and programs in Bhutan successful, which were found to be well aligned with country development needs, government development priorities, and Strategy 2020.
ADB has been closely coordinating with other development partners in key sectors to avoid duplication. It provided parallel financing for urban development in Thimphu with the World Bank, and for rural electrification with the Japan International Cooperation Agency and the Austrian Development Agency. ADB also collaborated with SNV on renewable energy, and is currently supporting a pilot biogas project in southern Bhutan, which builds on the experience of SNV to create a viable biogas sector. Other examples of effective partnerships include ADB’s rural electrification loans following the Rural Electrification Master Plan, which was developed with assistance from the Government of Japan. Similarly, development partners are using the Road Sector Master Plan, which was developed with ADB assistance. ADB’s new resident mission in Thimphu will help further strengthen its partnership and coordination with development partners.
The current COBP covers the period 2014–2016. The indicative cumulative ADF allocation for this period in aggregate is $147 million. The 2014-2016 lending program will help develop the Nicachhu hydropower project (Green Power Development Project II), enhance transport connectivity and trade facilitation (South Asia Subregional Economic Cooperation (SASEC) Road Connectivity Project and SASEC Transport, Trade Facilitation and Logistics Project), improve urban infrastructure (Improved Urban Environmental Infrastructure Project), and provide additional financing to improve infrastructure at three domestic airports (Additional Financing for Air Transport Connectivity Enhancement Project). A nonlending program of $14.253 million has been programmed for 2014–2016.
Bhutan: Ongoing Loans and Grants
(As of 31 March 2014)
Bhutan: Ongoing Loans and Grants
(As of 31 March 2014)
| Year of | Project Amount | Disbursements | |||
|---|---|---|---|---|---|
| Project | Approval | ($ million) | ($ million) | ||
| LOANS | |||||
| Urban Infrastructure Development Project | 2006 | 25.5 | 20.8 | ||
| Green Power Development Project (OCR Loan) | 2008 | 51.0 | 51.0 | ||
| Green Power Development Project | 2008 | 29.4 | 29.4 | ||
| Urban Infrastructure Project | 2011 | 19.7 | 2.1 | ||
| SASEC Trade Facilitation Program | 2012 | 8.3 | 3.1 | ||
| Strengthening Economic Management Program | 2013 | 14.3 | 0.0 | ||
| Additional Financing for Green Power Development Project | 2013 | 39.6 | 19.5 | ||
| GRANTS | |||||
| Micro, Small, and Medium-sized Enterprise Sector | 2007 | 8.3 | 8.3 | ||
| Development Project | |||||
| SASEC Information Highway Project | 2007 | 4.7 | 2.1 | ||
| Green Power Development Project | 2008 | 25.3 | 23.9 | ||
| Road Network Project II | 2009 | 38.8 | 21.1 | ||
| Rural Renewable Energy Development Project | 2010 | 21.6 | 10.2 | ||
| Air Transport Connectivity Enhancement Project | 2012 | 6.9 | 1.5 | ||
| SASEC Trade Facilitation Program | 2012 | 3.3 | 3.3 | ||
| Strengthening Economic Management Program | 2013 | 20.8 | 20.8 | ||
Bhutan: Ongoing Loans and Grants
(As of 31 March 2014)
| Year of | Project Amount | Disbursements | |||
|---|---|---|---|---|---|
| Project | Approval | ($ million) | ($ million) | ||
| LOANS | |||||
| Urban Infrastructure Development Project | 2006 | 25.5 | 20.8 | ||
| Green Power Development Project (OCR Loan) | 2008 | 51.0 | 51.0 | ||
| Green Power Development Project | 2008 | 29.4 | 29.4 | ||
| Urban Infrastructure Project | 2011 | 19.7 | 2.1 | ||
| SASEC Trade Facilitation Program | 2012 | 8.3 | 3.1 | ||
| Strengthening Economic Management Program | 2013 | 14.3 | 0.0 | ||
| Additional Financing for Green Power Development Project | 2013 | 39.6 | 19.5 | ||
| GRANTS | |||||
| Micro, Small, and Medium-sized Enterprise Sector | 2007 | 8.3 | 8.3 | ||
| Development Project | |||||
| SASEC Information Highway Project | 2007 | 4.7 | 2.1 | ||
| Green Power Development Project | 2008 | 25.3 | 23.9 | ||
| Road Network Project II | 2009 | 38.8 | 21.1 | ||
| Rural Renewable Energy Development Project | 2010 | 21.6 | 10.2 | ||
| Air Transport Connectivity Enhancement Project | 2012 | 6.9 | 1.5 | ||
| SASEC Trade Facilitation Program | 2012 | 3.3 | 3.3 | ||
| Strengthening Economic Management Program | 2013 | 20.8 | 20.8 | ||
Statistical Issues
Bhutan—Statistical Issues Appendix
As of April 30, 2014
Bhutan—Statistical Issues Appendix
As of April 30, 2014
| I. Assessment of Data Adequacy for Surveillance | |
| General: Data provision has some shortcomings, but is broadly adequate for surveillance. Most affected areas are: national accounts, balance of payments, and fiscal data. | |
| Real sector: As part of a Japan-funded technical assistance project for the Implementation of the System of National Accounts and the International Comparison Project that will take place over the next three years, the Statistics Department of the IMF (STA) will provide technical assistance to improve the national accounts and develop a producer price index. National Accounts: The accuracy and reliability of the data are affected by inadequate source data. Key shortcomings include heavy reliance on production data collected by line ministries, which often lack quality control, long lags in providing estimates, large revisions of historical data and, in certain cases, ad hoc estimation procedures. Lack of reliable data on expenditure components hampers estimation of national savings and domestic investment. The key factors contributing to the data deficiency are the shortage of qualified personnel and facilities. The National Statistical Bureau (NSB) is also constrained by the absence of a Statistics Act. Price statistics: Starting in 2004, the consumer price index (CPI) is compiled on a quarterly basis, the number of commodity prices has been greatly expanded, and the geographical scope broadened. Quarterly CPI series are available from March 2008 onwards. Monthly CPI series for domestic and imported goods starting from January 2013 have recently been released, but as yet the series are too short to aid in surveillance. NSB released the first monthly PPI series starting Q2 of 2012. | |
| Government finance statistics: Despite recent improvements in the quality of government finance statistics (GFS), the fiscal data are subject to frequent and substantial revisions, particularly in the expenditure area. The compilation and dissemination of budget execution data and GFS are very limited. Only annual budget execution data are compiled and disseminated, but with a long lag. No GFS are disseminated nationally. Quarterly data are now produced and made available internally. There are inconsistencies between the fiscal and monetary data with regard to bank financing, stemming from differences in the definition of government. | |
| Monetary statistics: While monetary statistics are generally consistent with the Fund’s guidelines, there is room for improvement in a number of areas, specifically: (i) the valuation of financial assets is based on purchase price while market or market-price equivalents would be preferable; (ii) to avoid misclassifications, a list of government units and nonfinancial public enterprises should be prepared and shared with the reporting financial institutions; During the technical assistance mission on Monetary and Financial Statistics (MFS) in March 2010, the authorities and STA improved the timeliness of data reporting to STA to be in line with national publications. As part of the mission objectives, the Royal Monetary Authority (RMA) has also submitted to STA the Financial Soundness Indicators (FSI) for Bhutan on a quarterly basis, which have been published on the IMF’s FSI website: http://fsi.imf.org/. | |
| Balance of payments: Despite significant improvements, external statistics continue to be affected by shortcomings. These include: (i) limited coverage of services’ transactions in the current account, (ii) long lags in dissemination. Building on the technical assistance mission in June 2009, a mission in March 2011, in conjunction with the RMA, developed the International Investment Position for Bhutan and a plan for improvement in balance of payments statistics. It includes a quarterly business survey, improved estimation methods, and increased timeliness. The mission was able to identify and correct some measurement problems, significantly lowering net errors and omissions in the BOP. The RMA currently compiles and disseminates quarterly balance of payments data. Bhutan began supplying balance of payments data for publication in IFS in November 2010 and currently submits the BOP data in BPM6 format to the Fund. Authorities have also been participating in IMF’s Coordinated Direct Investment Survey from 2011. | |
| II. Data Standards and Quality | |
| Bhutan participates in the General Data Dissemination System (GDDS), and posted metadata for the first time on the Fund’s Dissemination Standard Bulletin Board (DSBB) in May 2010. | No data ROSC is available. |
Bhutan—Statistical Issues Appendix
As of April 30, 2014
| I. Assessment of Data Adequacy for Surveillance | |
| General: Data provision has some shortcomings, but is broadly adequate for surveillance. Most affected areas are: national accounts, balance of payments, and fiscal data. | |
| Real sector: As part of a Japan-funded technical assistance project for the Implementation of the System of National Accounts and the International Comparison Project that will take place over the next three years, the Statistics Department of the IMF (STA) will provide technical assistance to improve the national accounts and develop a producer price index. National Accounts: The accuracy and reliability of the data are affected by inadequate source data. Key shortcomings include heavy reliance on production data collected by line ministries, which often lack quality control, long lags in providing estimates, large revisions of historical data and, in certain cases, ad hoc estimation procedures. Lack of reliable data on expenditure components hampers estimation of national savings and domestic investment. The key factors contributing to the data deficiency are the shortage of qualified personnel and facilities. The National Statistical Bureau (NSB) is also constrained by the absence of a Statistics Act. Price statistics: Starting in 2004, the consumer price index (CPI) is compiled on a quarterly basis, the number of commodity prices has been greatly expanded, and the geographical scope broadened. Quarterly CPI series are available from March 2008 onwards. Monthly CPI series for domestic and imported goods starting from January 2013 have recently been released, but as yet the series are too short to aid in surveillance. NSB released the first monthly PPI series starting Q2 of 2012. | |
| Government finance statistics: Despite recent improvements in the quality of government finance statistics (GFS), the fiscal data are subject to frequent and substantial revisions, particularly in the expenditure area. The compilation and dissemination of budget execution data and GFS are very limited. Only annual budget execution data are compiled and disseminated, but with a long lag. No GFS are disseminated nationally. Quarterly data are now produced and made available internally. There are inconsistencies between the fiscal and monetary data with regard to bank financing, stemming from differences in the definition of government. | |
| Monetary statistics: While monetary statistics are generally consistent with the Fund’s guidelines, there is room for improvement in a number of areas, specifically: (i) the valuation of financial assets is based on purchase price while market or market-price equivalents would be preferable; (ii) to avoid misclassifications, a list of government units and nonfinancial public enterprises should be prepared and shared with the reporting financial institutions; During the technical assistance mission on Monetary and Financial Statistics (MFS) in March 2010, the authorities and STA improved the timeliness of data reporting to STA to be in line with national publications. As part of the mission objectives, the Royal Monetary Authority (RMA) has also submitted to STA the Financial Soundness Indicators (FSI) for Bhutan on a quarterly basis, which have been published on the IMF’s FSI website: http://fsi.imf.org/. | |
| Balance of payments: Despite significant improvements, external statistics continue to be affected by shortcomings. These include: (i) limited coverage of services’ transactions in the current account, (ii) long lags in dissemination. Building on the technical assistance mission in June 2009, a mission in March 2011, in conjunction with the RMA, developed the International Investment Position for Bhutan and a plan for improvement in balance of payments statistics. It includes a quarterly business survey, improved estimation methods, and increased timeliness. The mission was able to identify and correct some measurement problems, significantly lowering net errors and omissions in the BOP. The RMA currently compiles and disseminates quarterly balance of payments data. Bhutan began supplying balance of payments data for publication in IFS in November 2010 and currently submits the BOP data in BPM6 format to the Fund. Authorities have also been participating in IMF’s Coordinated Direct Investment Survey from 2011. | |
| II. Data Standards and Quality | |
| Bhutan participates in the General Data Dissemination System (GDDS), and posted metadata for the first time on the Fund’s Dissemination Standard Bulletin Board (DSBB) in May 2010. | No data ROSC is available. |
Bhutan—Table of Common Indicators Required for Surveillance
As of March 18, 2014
Any reserve assets that are pledged of otherwise encumbered should be specified separately. Also, data should comprise short-term liabilities linked to a foreign currency but settled by other means as well as the notional values of financial derivatives to pay and to receive foreign currency, including those linked to a foreign currency but settled by other means.
Both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, notes and bonds.
Monthly CPI data for domestic and imported goods is available from April 2013 onward.
Foreign, domestic bank, and domestic nonbank financing.
The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds) and state and local governments.
Including currency and maturity composition.
Includes external gross financial asset and liability positions vis-à-vis nonresidents.
Daily (D), Weekly (W), Monthly (M), Quarterly (Q), Annually (A), Irregular (I); Not Available (NA).
Bhutan—Table of Common Indicators Required for Surveillance
As of March 18, 2014
| Date of Latest Observation | Date Received | Frequency of Data8 | Frequency of Reporting8 | Frequency of Publication8 | |
|---|---|---|---|---|---|
| Exchange rates | 03/2014 | 03/2014 | D | D | D |
| International reserve assets and reserve liabilities of the Monetary Authorities1 | 11/2013 | 02/2014 | M | M | M |
| Reserve/base money | 11/2013 | 02/2014 | M | M | M |
| Broad money | 11/2013 | 02/2014 | M | M | M |
| Central bank balance sheet | 11/2013 | 02/2014 | M | M | M |
| Consolidated balance sheet of the banking system | 11/2010 | 3/2011 | M | M | M |
| Interest rates2 | 09/2009 | 10/2009 | M | M | M |
| Consumer price index3 | 06/2013 | 06/2013 | Q/M | M | M |
| Revenue, expenditure, balance and composition of financing4 - general government5 | 2012/13 | 01/2014 | A | A | A |
| Revenue, expenditure, balance and composition of financing - central government | 2012/13 | 01/2013 | A | A | A |
| Stocks of central government and central government-guaranteed debt6 | 2012/13 | 01/2013 | A | A | A |
| External current account balance | 2013 | 01/2014 | A | A | A |
| Exports and imports of goods and services | 2013 | 01/2014 | A | A | A |
| GDP/GNP | 2013 | 01/2014 | A | A | A |
| Gross external debt | 06/2013 | 01/2014 | Q | Q | Q |
| International investment position7 | 06/2009 | 10/2009 | Q | Q | Q |
Any reserve assets that are pledged of otherwise encumbered should be specified separately. Also, data should comprise short-term liabilities linked to a foreign currency but settled by other means as well as the notional values of financial derivatives to pay and to receive foreign currency, including those linked to a foreign currency but settled by other means.
Both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, notes and bonds.
Monthly CPI data for domestic and imported goods is available from April 2013 onward.
Foreign, domestic bank, and domestic nonbank financing.
The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds) and state and local governments.
Including currency and maturity composition.
Includes external gross financial asset and liability positions vis-à-vis nonresidents.
Daily (D), Weekly (W), Monthly (M), Quarterly (Q), Annually (A), Irregular (I); Not Available (NA).
Bhutan—Table of Common Indicators Required for Surveillance
As of March 18, 2014
| Date of Latest Observation | Date Received | Frequency of Data8 | Frequency of Reporting8 | Frequency of Publication8 | |
|---|---|---|---|---|---|
| Exchange rates | 03/2014 | 03/2014 | D | D | D |
| International reserve assets and reserve liabilities of the Monetary Authorities1 | 11/2013 | 02/2014 | M | M | M |
| Reserve/base money | 11/2013 | 02/2014 | M | M | M |
| Broad money | 11/2013 | 02/2014 | M | M | M |
| Central bank balance sheet | 11/2013 | 02/2014 | M | M | M |
| Consolidated balance sheet of the banking system | 11/2010 | 3/2011 | M | M | M |
| Interest rates2 | 09/2009 | 10/2009 | M | M | M |
| Consumer price index3 | 06/2013 | 06/2013 | Q/M | M | M |
| Revenue, expenditure, balance and composition of financing4 - general government5 | 2012/13 | 01/2014 | A | A | A |
| Revenue, expenditure, balance and composition of financing - central government | 2012/13 | 01/2013 | A | A | A |
| Stocks of central government and central government-guaranteed debt6 | 2012/13 | 01/2013 | A | A | A |
| External current account balance | 2013 | 01/2014 | A | A | A |
| Exports and imports of goods and services | 2013 | 01/2014 | A | A | A |
| GDP/GNP | 2013 | 01/2014 | A | A | A |
| Gross external debt | 06/2013 | 01/2014 | Q | Q | Q |
| International investment position7 | 06/2009 | 10/2009 | Q | Q | Q |
Any reserve assets that are pledged of otherwise encumbered should be specified separately. Also, data should comprise short-term liabilities linked to a foreign currency but settled by other means as well as the notional values of financial derivatives to pay and to receive foreign currency, including those linked to a foreign currency but settled by other means.
Both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, notes and bonds.
Monthly CPI data for domestic and imported goods is available from April 2013 onward.
Foreign, domestic bank, and domestic nonbank financing.
The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds) and state and local governments.
Including currency and maturity composition.
Includes external gross financial asset and liability positions vis-à-vis nonresidents.
Daily (D), Weekly (W), Monthly (M), Quarterly (Q), Annually (A), Irregular (I); Not Available (NA).
For Bhutanese citizens, the annual private travel FX allowance is set at $3,000 (plus $1,000 per each credit or debit card), the annual FX allowance for living expenses and stipend for education-related travel are set at $1,500 and $900, respectively, and the daily FX allowance for business travel is limited to the amount imposed by the Ministry of Finance on government officials. The RMA may provide access to FX above the private and education-related travel limits on a case-by-case basis, but does not publish any guidance on it. For medical travel by Bhutanese citizens, the exchange restriction has been removed since FX is made available upon provision of supporting documents. Resident non-citizens, however, must use their own foreign currency sources for all types of travel.
Resident non-citizens must use their own foreign currency sources for subscriptions, application and testing fees and professional membership fees. Resident Bhutanese citizens may access FX exceeding the limits (currently US$300 without documentation and US$3,000 upon providing documentary evidence) with RMA approval. While such approval is granted based on documentary evidence, this is not specified in any RMA guidance. Thus, the limits create a “chilling effect” with respect to potential customers, since in the absence of any published guidance, they do not know that the limits are indicative.
Restrictions are maintained on residents’ family remittances in convertible currency. Residents who are not Bhutanese citizens may transfer only 50 percent of their monthly salaries and the rest of the funds at the end of the employment. While such approval is granted based on documentary evidence, this is not specified in any RMA guidance. Thus, the limits create a “chilling effect” with respect to potential customers, since in the absence of any published guidance, they do not know that the limits are indicative. Nonresidents may remit their salary only after deduction of estimated living expenses.
Limits are imposed on the purchase of Indian rupee amounts for personal and business travels to India by residents (up to 10,000 Indian rupee per day and 50,000 Indian rupee per month for personal travel, while the access to pay for business travel daily expenses in Indian rupee is limited to the amount equal to the daily allowance imposed by the Ministry of Finance on government officials), and living expenses of citizen students studying in India (in forms of limits on maximum 20,000 Indian rupee stipend and 20,000 Indian rupee living allowances/incidental expenses per month). The RMA may provide access above these limits on case-by-case review, but does not publish any guidance on it. Thus, the limits create a “chilling effect” with respect to potential customers, since in the absence of any published guidance, they do not know that the limits are indicative.
Limits are imposed on family remittances by Indian expatriates, who are Bhutanese residents, to pay for their children’s certain education expenses in India (in forms of limits on maximum 20,000 Indian rupee stipend and 20,000 Indian rupee living allowances/incidental expenses per month). The RMA may provide access above these limits on case-by-case review, but does not publish any guidance on it. Thus, the limits create a “chilling effect” with respect to potential customers, since in the absence of any published guidance, they do not know that the limits are indicative. Workers in specified industries are allowed to make family remittances, but with respect to workers on private housing projects, the RMA’s 2012 guidelines on Indian rupee transactions only allow access to Indian rupee for remittances by Indian expatriate workers on housing projects approved by March 8, 2012. There is no provision for family remittances by resident Bhutanese citizens to India.
Current regulations only allow residents in Bhutan to make limited salary remittances, and there is no provision for salary remittances in Indian rupee by nonresidents.
Importers making advance payments for imports in Indian rupee must submit evidence that the relevant goods entered Bhutan within 91 days. The RMA states that advance payments can be contracted for a longer period of time, but this is not reflected in any published guidelines or documents. Thus, the requirement creates a “chilling effect” with respect to potential customers, since in the absence of any published guidance, they do not know that the limit is indicative.
The RMA’s 2012 guidelines on Indian rupee transactions limit amounts for making advance payments to recruit Indian expatriate workers (up to 8,000 or 1,000 Indian rupee, depending on the type of employers). Moreover, these 2012 guidelines only specify certain employers who can purchase Indian rupee for making such advance payments, although the RMA states that in practice other employers may purchase India rupee for such purposes as well. The specific provision of the 2012 guidelines create a “chilling effect”, since in the absence of any published guidance, other employers do not know that they would be entitled to make advance payments. With respect to private housing projects, the guidelines allow access to Indian rupee for advance recruitment payments only to Indian expatriate workers on housing projects approved by March 8, 2012.
Pursuant to a circular issued by the RMA in 2012, no access to Indian rupee is allowed for the import of construction materials from India for housing projects approved after March 8, 2012, or for the import of vehicles from India. The RMA intends to remove these measures by July, 2014.
The RMA’s 2012 guidelines on Indian rupee transactions impose an immediate ban to access Indian rupee for unrelated transactions by any person violating any provision of the guidelines. There are also some specific provisions in these guidelines that state, for example, that failure to submit medical expense documentation (with respect to both citizens and residents), or personal travel documentation (with respect to residents only) would deprive the relevant person from accessing Indian rupee in the future. The authorities have stated that they are willing to modify these penalties into fines, so as to remove the exchange restriction.