Abstract
BHUTAN
Title Page
BHUTAN
STAFF REPORT FOR THE 2022 ARTICLE IV CONSULTATION—INFORMATIONAL ANNEX
April 26,2022
Prepared By
Asia and Pacific Department
Contents
FUND RELATIONS
INFORMATION ON THE ACTIVITIES OF OTHER IFIS
STATISTICAL ISSUES
Fund Relations
(As of February 28, 2022)
Membership Status:
Joined: September 28, 1981; Article XIV.
General Resources Account
| SDR Million | % Quota | |
| Quota | 20.40 | 100.00 |
| Fund Holdings of Currency (Exchange Rate) | 15.85 | 77.72 |
| Reserve Tranche Position | 4.55 | 22.29 |
| Lending to the Fund |
| SDR Million | % Quota | |
| Quota | 20.40 | 100.00 |
| Fund Holdings of Currency (Exchange Rate) | 15.85 | 77.72 |
| Reserve Tranche Position | 4.55 | 22.29 |
| Lending to the Fund |
SDR Department:
| SDR Million | % Allocation | |
| Net cumulative allocation | 25.54 | 100.00 |
| Holdings | 25.68 | 100.56 |
| SDR Million | % Allocation | |
| Net cumulative allocation | 25.54 | 100.00 |
| Holdings | 25.68 | 100.56 |
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.
| Forthcoming | |||||
| 2022 | 2023 | 2024 | 2025 | 2026 | |
| 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.
| Forthcoming | |||||
| 2022 | 2023 | 2024 | 2025 | 2026 | |
| 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) foreign exchange balancing requirement on remittances of income in convertible currencies or other foreign currencies from FDI; and (ii) on the availability of FX for importers who have not provided evidence that goods for which payments have been made were actually imported.1
Bhutan also maintains exchange restrictions subject to Fund approval under Article VIII, Section 2(a) in connection with: (i) the foreign exchange balancing requirements for imports of capital goods (for projects involving FDI) and primary raw materials (for certain industrial projects); (ii) requiring FDI companies to pay for their operational expenses (including insurance payments) from their own foreign exchange resources; and (iii) requiring Bhutanese companies to pay the interest on and amortization of external loans from their own foreign currency resources.2
More recently, Bhutan introduced new provisions in the Foreign Exchange Rules and Regulations 2020 and several other initiatives to further liberalize the exchange system. On the relaxation on access to foreign currency for industries, new provision was inserted: “RMA shall provide convertible currency (CC) requirement for the import of raw materials (up to 6-months) for newly established companies as a start-up support and proprietary raw materials (10 percent of actual sales) approved by the RGoB”. Moreover, CC eligibility for local industries was increased from 80 to100 percent for their exports. In addition, existing regulations were streamlined and aligned with other relevant regulations. For example, the prepayment of ECB loans was aligned with the ECB guidelines 2019 and the foreign currency operational expenses requirement of FDI companies was aligned with the FDI Investment Rules and Regulations 2019. New provision was also included to streamline FC account operations held by local NGOs and CSOs.
Finally, Bhutan has launched Incentive on Inward Remittance Pilot Project3 to promote inward remittance, through which the RMA i) facilitated 1 percent incentive amount on every converted convertible currency remitted to Bhutan by non-resident Bhutanese (NRB);and 2) support authorized banks and money transfer agents with infrastructure/setup orannual AM L/CFT compliance/statutory costs for 1 year on a cost-sharing basis.
Article IV Consultation
Bhutan is on a 24-month consultation cycle. The 2022 Article IV consultation was concluded by the Executive Board on May 11, 2022.
Technical Assistance
In recent years Bhutan has received technical assistance in the areas of macro-fiscal capacity building, budget planning, treasury and cash management, national accounts statistics, balance of payments statistics, e-GDDS, government debt markets, producer price index, and the consumer price index. Bhutan has also received technical assistance and training from the South Asia Regional Training and Technical Assistance Center (SARTTAC) covering most recently liquidity management and forecasting, implementation of the goods and services tax, tax administration, national accounts and BOP statistics.
A Resident Goods and Services Tax Advisor was installed at the Ministry of Finance since 2018.
Resident Representative
Mr. Luis Breuer has been the Senior Resident Representative since 2019. He is based in New Delhi.
Information on the Activities of Other IFIS
Information on the activities of other IFIs in Bhutan can be found at:
World Bank http://www.worldbank.org/en/country/bhutan/overview
Asian Development Bank: https://www.adb.org/countries/bhutan/main
Statistical Issues
(As of April 4,2022)
| 1. Assessment of Data Adequacy for Surveillance | |
| General: Data provision is broadly adequate for surveillance but has areas for improvements in national accounts, balance of payments, and fiscal data. | |
| Real sector Since 2017, technical assistance (TA) is being provided through the South Asia Training and Technical Assistance Center (SARTTAC), with TA focused on national accounts statistics, updating producer price indices, and establishing high frequency indicators. | |
| National Accounts: The current base year of the national accounts is 2000, which may affect the accuracy and reliability of the GDP estimates given the changing structure of the Bhutanese economy in the decades si nee. The National Statistical Bureau (NSB) is currently carrying out a project, with TA provided through SARTTAC, to rebase GDP from 2000to 2017, including conducting an Economic Census and populating supply and use tables. The TA has also focused on easing capacity constraints in NSB, which continues to face a shortage of qualified personnel and facilities. The NSB is also constrained by the absence of a Statistics Act. Thus far, Bhutan does not produce quarterly national accounts data. | |
| Price statistics: Starting in January 2013, the consumer price ind ex (CPI) is compiled on a monthly basis. Weights for the current CPU are based on the 2017 Bhutan Living Standard Survey (BLSS), a survey conducted every five years. A Producer Price Index is com pi led monthly but disseminated quarterly. It covers manufacturing, mining, utilities, transport, information, and comm unication activities. The current index weights are calculated using an establishment census with a reference period of 2010. TA is currently being provided to the National Statistics Bureau to update to indexweightsusingthe2017 Economic Census. | |
| Government finance statistics: The quality of government finance statistics (GFS) has improved in recent years. The authorities have started producing and publishing quarterly budget performance report since FY2020/21. Despite the important progress, there remains some issues with the consolidation of the GFS, particularly relating to the treatment of SOE debt Further improvements in GFS are expected under the ongoing SARTTAC technical assistance on fiscal data. | |
| Monetary statistics: Monetary and financial statistics are compiled broadly in line with the Monetary and Financial Statistics Manual., The Royal Monetary Authority (RMA) reports monetary and financial statistics monthly, using Standardized Report Forms (SRFs) for the central bank, other depository corporations, and other financial corporations, and monetary data based on these SRFs are published the International Financial Statistics. However, some data shortcomings include the valuation of financial assets which are recorded at acquisition cost rather than at market price or fair value. | |
| Financial Sector Surveillance: The RMA reports to STA the Financial Soundness Indicators (FSI) on a quarterly basis which include 12 core and 7 encouraged indicators for deposit takers. The FSIs are published on the IMF’s FSI web page. | |
| Balance of payments: External sector statistics (ESS) have improved in recent years. The RMA compiles and disseminates quarterly balance of payments (BOP) and international investment position (IIP) data (published and updated at a monthly frequency) and participates in the Coordinated Direct Investment Survey (CDIS). RMA is expected soon to start reporting external debt statistics to the World Bank’s Quarterly External Debt Statistics Database. While the coverage, accuracy, and timeliness of ESS data has improved, there remains some gaps between the BOP and the IIP data and some components of the BOP statistics. | |
| II. Data Standards and Quality | |
| Bhutan participates in the enhanced General Data Dissemination System and maintains a regularly updated National Summary Data Page. | No data ROSC is available. |
| 1. Assessment of Data Adequacy for Surveillance | |
| General: Data provision is broadly adequate for surveillance but has areas for improvements in national accounts, balance of payments, and fiscal data. | |
| Real sector Since 2017, technical assistance (TA) is being provided through the South Asia Training and Technical Assistance Center (SARTTAC), with TA focused on national accounts statistics, updating producer price indices, and establishing high frequency indicators. | |
| National Accounts: The current base year of the national accounts is 2000, which may affect the accuracy and reliability of the GDP estimates given the changing structure of the Bhutanese economy in the decades si nee. The National Statistical Bureau (NSB) is currently carrying out a project, with TA provided through SARTTAC, to rebase GDP from 2000to 2017, including conducting an Economic Census and populating supply and use tables. The TA has also focused on easing capacity constraints in NSB, which continues to face a shortage of qualified personnel and facilities. The NSB is also constrained by the absence of a Statistics Act. Thus far, Bhutan does not produce quarterly national accounts data. | |
| Price statistics: Starting in January 2013, the consumer price ind ex (CPI) is compiled on a monthly basis. Weights for the current CPU are based on the 2017 Bhutan Living Standard Survey (BLSS), a survey conducted every five years. A Producer Price Index is com pi led monthly but disseminated quarterly. It covers manufacturing, mining, utilities, transport, information, and comm unication activities. The current index weights are calculated using an establishment census with a reference period of 2010. TA is currently being provided to the National Statistics Bureau to update to indexweightsusingthe2017 Economic Census. | |
| Government finance statistics: The quality of government finance statistics (GFS) has improved in recent years. The authorities have started producing and publishing quarterly budget performance report since FY2020/21. Despite the important progress, there remains some issues with the consolidation of the GFS, particularly relating to the treatment of SOE debt Further improvements in GFS are expected under the ongoing SARTTAC technical assistance on fiscal data. | |
| Monetary statistics: Monetary and financial statistics are compiled broadly in line with the Monetary and Financial Statistics Manual., The Royal Monetary Authority (RMA) reports monetary and financial statistics monthly, using Standardized Report Forms (SRFs) for the central bank, other depository corporations, and other financial corporations, and monetary data based on these SRFs are published the International Financial Statistics. However, some data shortcomings include the valuation of financial assets which are recorded at acquisition cost rather than at market price or fair value. | |
| Financial Sector Surveillance: The RMA reports to STA the Financial Soundness Indicators (FSI) on a quarterly basis which include 12 core and 7 encouraged indicators for deposit takers. The FSIs are published on the IMF’s FSI web page. | |
| Balance of payments: External sector statistics (ESS) have improved in recent years. The RMA compiles and disseminates quarterly balance of payments (BOP) and international investment position (IIP) data (published and updated at a monthly frequency) and participates in the Coordinated Direct Investment Survey (CDIS). RMA is expected soon to start reporting external debt statistics to the World Bank’s Quarterly External Debt Statistics Database. While the coverage, accuracy, and timeliness of ESS data has improved, there remains some gaps between the BOP and the IIP data and some components of the BOP statistics. | |
| II. Data Standards and Quality | |
| Bhutan participates in the enhanced General Data Dissemination System and maintains a regularly updated National Summary Data Page. | No data ROSC is available. |
Bhutan: Table of Common Indicators Required for Surveillance
(As of April 4,2022)
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, and rates on treasury bills, notes, and bonds.
Monthly CPI data for domestic and imported goods are 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-a-vis nonresidents.
Daily (D), Weekly (W), Monthly (M), Quarterly (Q), Annually (A), Irregular (I); NotAvailable (NA)
Bhutan: Table of Common Indicators Required for Surveillance
(As of April 4,2022)
| Date of Latest Observation | Date Received | Frequency of Data5 | Frequency of Reporting8 | Frequency of Publication8 | |
|---|---|---|---|---|---|
| Exchange rates | Mar-22 | Mar-22 | D | D | D |
| International reserve assets and reserve liabilities of the Monetary Authorities1 | Sep-21 | Mar-22 | M | M | M |
| Reserve/base money | Nov-21 | Mar-22 | M | M | M |
| Broad money | Nov-21 | Jan-22 | M | M | M |
| Central bank balance sheet | Nov-21 | Nov-21 | M | M | M |
| Consolidated balance sheet of the banking system | NA | NA | M | M | M |
| Interest rates2 | Mar-22 | Mar-22 | M | M | M |
| Consumer price index3 | Feb-22 | Mar-22 | Q/M | M | M |
| Revenue, expenditure, balance and composition of financing4 -general government5 | FY2020/21 | Nov-21 | A | A | A |
| Revenue, expenditure, balance and composition of financing3- central government | Dec-21 | Dec-21 | M | M | M |
| Stocks of central government and central government-guaranteed debt6 | Q4 2021 | Feb-22 | Q | Q | Q |
| External current account balance | Q4 2021 | Feb-22 | Q | Q | M |
| Exports and imports of goods and services | Q2 2021 | Sep-21 | Q | Q | Q |
| GDP/GNP | Q4 2021 | Mar-22 | Q | Q | M |
| Gross external debt | FY2020/21 | Mar-22 | A | A | M |
| International investment position7 | Sep 2021 | Mar-22 | M | M | M |
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, and rates on treasury bills, notes, and bonds.
Monthly CPI data for domestic and imported goods are 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-a-vis nonresidents.
Daily (D), Weekly (W), Monthly (M), Quarterly (Q), Annually (A), Irregular (I); NotAvailable (NA)
Bhutan: Table of Common Indicators Required for Surveillance
(As of April 4,2022)
| Date of Latest Observation | Date Received | Frequency of Data5 | Frequency of Reporting8 | Frequency of Publication8 | |
|---|---|---|---|---|---|
| Exchange rates | Mar-22 | Mar-22 | D | D | D |
| International reserve assets and reserve liabilities of the Monetary Authorities1 | Sep-21 | Mar-22 | M | M | M |
| Reserve/base money | Nov-21 | Mar-22 | M | M | M |
| Broad money | Nov-21 | Jan-22 | M | M | M |
| Central bank balance sheet | Nov-21 | Nov-21 | M | M | M |
| Consolidated balance sheet of the banking system | NA | NA | M | M | M |
| Interest rates2 | Mar-22 | Mar-22 | M | M | M |
| Consumer price index3 | Feb-22 | Mar-22 | Q/M | M | M |
| Revenue, expenditure, balance and composition of financing4 -general government5 | FY2020/21 | Nov-21 | A | A | A |
| Revenue, expenditure, balance and composition of financing3- central government | Dec-21 | Dec-21 | M | M | M |
| Stocks of central government and central government-guaranteed debt6 | Q4 2021 | Feb-22 | Q | Q | Q |
| External current account balance | Q4 2021 | Feb-22 | Q | Q | M |
| Exports and imports of goods and services | Q2 2021 | Sep-21 | Q | Q | Q |
| GDP/GNP | Q4 2021 | Mar-22 | Q | Q | M |
| Gross external debt | FY2020/21 | Mar-22 | A | A | M |
| International investment position7 | Sep 2021 | Mar-22 | M | M | M |
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, and rates on treasury bills, notes, and bonds.
Monthly CPI data for domestic and imported goods are 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-a-vis nonresidents.
Daily (D), Weekly (W), Monthly (M), Quarterly (Q), Annually (A), Irregular (I); NotAvailable (NA)
At the time of the previous Article IV consultation with Bhutan, the member maintained one other exchange restriction subject to Article XIV, which was removed upon the entry into force of the 2020 Foreign Exchange Rules and Regulations 2020. This restriction was on the availabilityofforeign exchange for travel, except for medical travel abroad by Bhutanese citizens, invisibles, and private transfers.
At the time of the previous Article IV consultation with Bhutan, the member maintained two other exchange restrictions subject to Article VIII, which were removed upon the entry into force of the 2020 Foreign Exchange Rules and Regulations 2020 and the 2019 Penalty Rules and Regulations. These restrictions were on (i) banning residents who do not comply with the requirement to repatriate export proceeds from accessing FX for unrelated imports, and (ii) restricting the availability of Indian rupees for making payments and transfers to India for certain current international transactions and banning access to Indian rupees for unrelated current international transactions for those who contravene RMA’s 2012 guidelines on Indian rupee transactions.