Annual Report 2017-2018

RMA Annual Report 2018 1
2 RMA Annual Report 2018

Annual Report
2018
Statutory Requirements
T
he Royal Monetary Authority (RMA) of Bhutan is
pleased to publish the Annual Report 2018 to the Royal
Government of Bhutan (RGoB). The Report is also hosted
on the RMA’s website.
This Report reviews the macroeconomic developments and

policy initiatives for the fiscal year 2017/18. An overview on the
prospects of the medium term macroeconomic development are
also presented in this Report based on quarterly Macroeconomic
Framework Coordination Technical Committee’s (MFCTC)
update.
We would like to thank all who have contributed to the

information contained in this Report.
i RMA Annual Report 2018

His Majesty The Druk Gyalpo Awards Druk
Thuksey Medal to the Governor and the RMA
meet the hopes and aspirations of the people of
Bhutan. The Druk Thuksey was also awarded to
the RMA in recognition of its efforts in addressing
youth unemployment, serving farmers and
working closely with the Government.
The RMA is inspired by this honour from His

Majesty and pledges to serve the Tsa-Wa-Sum
with renewed passion and dedication.
“
His Majesty the Druk Gyalpo
awards Druk Thuksey Medal to the
Governor and RMA during the 110th
National Day in Haa.”
Governor Dasho Penjore (left) with His Majesty the Druk

RMA employees receive Civil
T
Gyalpo after the award ceremony in Haa.
Service awards 2018
he RMA is humbled and inspired by the
recognition bestowed on the Governor, In 2018, 33 officials of the RMA received medals
Dasho Penjore, and the institution, from His Majesty the Druk Gyalpo for their
by His Majesty the Druk Gyalpo. His dedicated service to the Nation. Of the total
Majesty awarded the prestigious Druk recipients, 19 officials were awarded with Bronze
Thuksey medal to Dasho Penjore during the 110th medal for serving 10 years, 7 officials received
National Day Celebration in Haa for his dedicated the Silver medal for serving 20 years, 6 senior
service—for always being guided by the need to officials, including the Governor, received Gold
RMA Annual Report 2018 ii

Dasho Penjore with RMA staff who received the Civil Service Awards in 2018 and RMA new recruits
medal for their dedicated service for 30 years stakeholders to further enhance financial
and more. In addition, Mr. Dupsang Tamang, inclusion, particularly among the children and the
Senior Administrattive Assistant, received life time youth - the foundation of our future.
service award.
RMA receives Global Inclusion

awards 2018
The RMA received the country award for Asia and
Pacific region during the global inclusion awards
2018. 7th Annual Global Inclusion award ceremony
was organized by Child and Youth Finance
International, the Argentina’s G20 Presidency and
Global Partnership for Financial Inclusion (GPFI)
with support of the G20-2020 Saudi Secretariat.
The awards were held as part of the GPFI
forum: “Technological Trends in Digital Financial
Inclusion” agenda held from 3-4 July in Riyadh,
Saudi Arabia.
His Excellency, Kutshab Tshering Gyaltshen Penjor,

Ambassador of Bhutan to Kuwait, accepted the
award on behalf of the RMA and Bhutan. The The Global Inclusion Awards presented to RMA in July 2018
award will go a long way to motivate various
iii RMA Annual Report 2018

Foreword from the Governor
of digitization effort not only ensured easy access
to essential financial services but also helped to
promote the objective of financial inclusion.
Some of the notable accomplishments of the

year were implementation of E-Money Issuers
Rules and Regulations 2017, implementation
of Payment and Settlement Systems Rules and
Regulation 2018, development of operating
Procedural Guidelines for Bhutan Financial
Switch, implementation of Global Interchange
for Financial Transactions (GIFT) payment and
authorization of payment systems.
On the operational front, the RMA successfully

closed its accounts for the FY 2017/18, and
T
submitted a net surplus of Nu. 1.5 billion to the
Royal Government of Bhutan (RGoB). The net
he last year was a historic year for surplus for FY 2017/18 was a record high reflecting
the RMA with the prestigious “Druk to some measure the efficiency in overall reserve
Thuksey” (Heart-Son of Bhutan) medal management.
being awarded by His Majesty the Druk
Gyalpo during the 110th National Day On the macroeconomic front, domestic economic
celebration in Haa on December 17, 2017. I was growth was recorded at 4.6 percent in 2017.
deeply humbled and overwhelmed to receive the Headline inflation decreased to a historic low of
Druk Thuksey which I believe was in recognition of 2.6 percent in June 2018 from 5.9 percent in June
my efforts in serving the country to the best of my 2017, largely due to a significant fall in prices of
abilities and in the interest of the nation as well as both domestic and imported goods.
a reminder to serve with renewed dedication and
sincerity. I was even happier that the RMA as an On the external front, the trade deficit improved
institution also received the Druk Thuksey which from 20.9 percent of GDP to 16.4 percent
will serve as a constant source of motivation for during FY 2017/18, resulting into a lower
all the staff to work with humility and in the larger current account deficit of 19 percent of GDP. As
interest of the nation. a result, international reserves remained at a
comfortable level sufficient to finance 13 months
The RMA continued to promote policies to build of merchandise imports.
an inclusive and resilient economy backed by a
strong financial system. Several initiatives and The medium term growth prospects remain
polices were launched during the FY 2017/18, optimistic. Real GDP is projected to grow at
such as the Priority Sector Lending (PSL) an average of 6.5 percent, supported by the
Guidelines, the Anti-Money Laundering and commissioning of hydro power projects and
Combating the Financing of Terrorism (AML/CFT) the services sector. Inflation is also anticipated
Act 2018, the Corporate Governance Rules and to remain at a moderate level, and external
Regulation 2018, the Rules and Regulations for imbalance to improve with the current
Cottage and Small Industries (CSI) Banks in Bhutan account deficit at 15.6 percent of GDP due to
2018, the National Financial Inclusion Strategy commissioning of major hydro power projects
(2018-2023) and the National Financial Literacy and subsequent reduction in the import for public
Strategy (2018-2023). investment projects.
Against these positive backdrops, the RMA

An important focus area for the RMA continues will continue to build sound macroeconomic
to be in digitizing the payments and settlement fundamentals through necessary interventions
system in the country. The positive externalities in the monetary and financial sector. To promote
RMA Annual Report 2018 iv

an effective monetary policy transmission lending (iii) promoting market access for domestic
and support the existing pegged exchange goods and services and (iv) creating a conducive
arrangement, the RMA will be realigning the regulatory and business environment.
existing Minimum Lending Rate (MLR) system
with the new monetary policy implementation To promote a market driven and seamless
framework which includes the implementation financial intermediation process, important
of the policy rate along with standing facilities policy initiatives and economic reforms must
for the banking sector. The main objective and be complemented by use of effective modern
expected benefits from this new framework are to fintec solutions to generate greater efficiency
(i) facilitate monetary policy signaling (ii) maintain gains and spur widespread economic and social
an optimal level of liquidity in the banking benefits to our communities. The RMA will
system (iii) allow banks to enhance their treasury continue to modernize the current payments
function, leading to reduced liquidity costs and and settlement system and strengthen financial
settlement risks, and (iv) support development of inclusion initiatives. To complement the PSL
the domestic money market. initiatives, the RMA will also continue to make an
effort to promote easy access to finance through
Besides these conventional demand management alternative financing options.
functions, the RMA will also work closely with
the Government to strengthen the supply side As Bhutan and India celebrates the 50th Year of
interventions to ensure that the existing financial Diplomatic Relations this year, the RMA and
sector policies translate to generate domestic the National Payments Corporation of India will
employment and output. implement a historic connection of the Bhutan
Financial Switch and the National Financial
Engaging the Credit Information Bureau (CIB) is Switch of India, to further strengthen the
an essential element of developing a modern economic and financial linkages between the
financial infrastructure to bring discipline in the two countries. The integration will complement
credit market as well as to promote a culture of financial services delivery, and act as one of the
being a responsible borrower. To complement key drivers to enhance digital financial inclusion
the past efforts made through promoting access through affordable provisioning of such financial
to finance through PSL and MLR, the RMA and infrastructure not only within Bhutan but also
relevant stakeholders are also making a headway across the border.
in developing other alternative sources of
financing. The RMA is fully committed to collaborate
with the Government to further accelerate the
To further stimulate the economy, the RMA’s economy through economic diversification as
monetary policy will remain supportive of the envisioned in the 12th FYP. As we welcome the new
development of non-hydro sector, particularly, year, the RMA remains optimistic and steadfast
the CSI sector - a potential driver for economic in serving the Tsa-Wa-Sum with renewed energy
diversification. To bring in both regional and and dedication. I am confident that the Year 2019
international experiences and best practices will continue to bestow us with greater success,
for revitalizing the CSI sector, the RMA in prosperity and well-being.
collaboration with both the domestic and
international partners will be organizing the
2nd BEFIT conference in 2019, focusing on the
following four thematic areas (i) creating an Tashi Delek!
enterprise ecosystem and supporting capacity
development through technological upgradation
and innovations (ii) addressing challenges in
access to finance through both traditional banking
channels and alternate source of financing (Dasho Penjore)
such as crowd funding, angel investors and P2P Governor
v RMA Annual Report 2018

Contents
1 5
Financial Sector Development 63
RMA’s Vision, Mission, Values
& Organizational Structure 9 Financial Sector Review 64
New Initiative Undertaken 69
Key Macroeconomic
2 21 6
Highlights Exchange Rate Arrangement &
Implications 71
Macroeconomic Developments 22
Policy Initiatives and Interventions 24 Exchange Rate Arrangement &
Priority Sector Lending 26 Implications 72
Macroeconomic Indicators 28 Box 6.1 Terms of Trade 76
Box 6.2 Development in EER 78
3 7
Macroeconomic Financial Inclusion & Payment
Review FY 2017/18 29 System 79
3.1 Real Sector 30 State of Financial Inclusion
3.2 Inflation 32 Financial Inclusion Initiatives 80
3.3 Labor Supply and Employment 34 Box: 6.1 Launch of “Jab-chor” 86
3.4 Fiscal Sector 36 Box: 6.2 BEFIT 2019 87
3.5 External Sector 38 Modernization of Payment System 89
3.6 Money and Credit 43 Box: 6.3 Connecting Bhutan & India
Box: 3.1 Assessment on National Financial Switch 91
Credit to GDP gap 47
Box: 3.2 Medium-term
8
Macroeconomic Outlook 48
4
Annual Financial Statement 93
Annual Audited Account: FY 2017/18 94
Monetary Policy Operations 51

Monetary Policy Operations
New Monetary Policy
52
54
Statistical Tables
9 101
Box: 4.1 Modeling Inflation in Bhutan 56
Box: 4.2 Determining Key Policy Rate 57
10
Box: 4.3 Interest Rates 58
Box: 4.4 Collateral Framework 61
Box: 4.5 Workshop on
Monetary Policy Frameworks 62 Chronology, Glossary & Acronyms 129
Chronology of Major Developments 130
Abbreviations and Symbols 132
RMA Annual Report 2018

1
RMA’s Vision, Mission,
Values and Organizational
Structure
11 RMA Annual Report 2018 11

OUR VISION
A trusted, progressive and
resilient Central Bank
OUR MISSION
Strategic Pillars Reinforcing stable and inclusive
1. Reinforcing stable and inclusive economic growth
economic growth.
Maintaining stability and integrity
2. Maintaining the stability and of the financial system
integrity of the financial system
Advancing innovative financial
services and technology
Our Values
3. Advancing innovation and
financial technology S -Sincere
4. Fostering organizational M -Mindful
excellence A -Astute
R -Resilient
T -Timeless

and Organizational Structure
Our Vision monetary policy, and promoting

stable and efficient financial system.
The staff of RMA will conduct their
duties with great humility, integrity
The vision of RMA is to be a trusted, progressive
and unwavering loyalty.
and resilient central bank in fulfilling His Majesty
the King’s vision of ensuring a successful
democracy accompanied by economic Mindful – We will be mindful of our national
transformation based on the foundations of a just, responsibility and shall place the
equal and harmonious society. overarching national goals at the
heart of everything that we do. We will
v A Trusted, Progressive and provide stewardship to the financial
Resilient Central Bank institutions and shall collectively
endeavour to support the Nation in
promoting inclusive economic growth
through a participatory, responsive
and inclusive financial sector.
Our Mission
Astute- We will be astute in our service
delivery, leveraging on financial
technology to promote innovative,
efficient and inclusive financial
Drawing from the mandates of the RMA Act of
services to all sections of the society.
Bhutan 2010, the following are the missions:
The staff of RMA will demonstrate
ingenuity and excellence in their
R einforcing stable and inclusive professional conduct through

economic growth creative, critical and evidence-based
problem solving and decision-making
M aintaining stability and

integrity of the financial system
skills.
Resilient- We will promote a stable and sound

A dvancing innovative financial
services and technology financial sector that is resilient to
shocks and risks. The staff of RMA
will have foresight and fortitude to
respond to the threats to financial
stability.
Our Values Timeless- We will endeavour to uphold the

timeless values of Tha Damtshi and
We are inspired by the SMART principles for commit to provide services that
Bhutanese people espoused by His Majesty the are timely and relevant, addressing
King and take the privilege to adapt them in our the need of the hour by leveraging
organizational context and adopt them as our on technology and by being agile,
core values. adaptive and flexible to the fast-paced
changing environment.
Sincere – We will serve the Nation with utmost
sincerity in maintaining sound
I
n order to achieve our vision and mission, foundation of a just, equal and harmonious
the RMA’s strategic focus and priorities shall society. The strategic focus of the pillar shall be
be conducted through the following four to enhance the livelihood of the youth and the
strategic pillars. rural population.
STRATEGIC PILLAR 1: STRATEGIC PILLAR 2:

REINFORCING STABLE AND INCLUSIVE ECONOMIC MAINTAINING STABILITY AND INTEGRITY OF
GROWTH FINANCIAL SYSTEM
This strategic pillar shall be the driving force As the regulatory body of financial institutions,
in realizing His Majesty’s vision of ensuring the RMA has the mandate to ensure the stability
successful democracy accompanied by and integrity of the financial system. The
economic transformation based on the RMA shall strive to strengthen the corporate

governance and regulation of the financial expanding financial services to the unreached
institutions to ensure the trust and confidence of and un-banked population in an efficient and
the people in the Central Bank and the financial cost effective manner.
system.
STRATEGIC PILLAR 4:
STRATEGIC PILLAR 3: FOSTERING ORGANIZATIONAL EXCELLENCE
ADVANCING INNOVATION AND FINANCIAL We recognize that for the achievement of above
TECHNOLOGY three strategic pillars and the fulfillment of
The RMA shall lead the financial sector in RMA’s vision and mission, the efficiency and
adopting and keeping abreast of the latest effectiveness of the organization are critical.
developments in financial technologies in To this end, the RMA shall strive for excellence
improving the delivery of efficient and convenient in instituting best organizational systems and
financial services to the public. We shall take management practices; and building highly
advantage of greater network connectivity and motivated and knowledge-based talent pool in
mobile penetration throughout the country for the organization.
A
s per the RMA Act 2010, Section 33, the of policies and corporate governance of the
Board constitutes seven members with Authority. All functions are carried out under the
three from the RMA (Governor and two general supervision of the Board supported by
Deputy Governors) and remaining from the RMA’s Executive Committee. The Department
the Government. The Governor is the of Internal Audit and Governor’s Office report
Chairman of the Board. directly to the Governor, while other departments
report to their respective Deputy Governors.
The Board is responsible for the formulation
Board of Directors
MEMBER
CHAIRMAN
M
r. Nim Dorji is the Secretary of Ministry
D
of Finance. Before he was appointed as
asho Penjore was appointed as the Governor the Finance Secretary, he served as the
of the RMA in December 2015. Director General of Department of Agriculture.
Dasho started his career in the RMA in 1987 He holds a Master’s degree in Business
and served as the Deputy Managing Director Administration (MBA) from the University of
from 2003 to 2006. In 2006, he was appointed as Canberra, Australia.
the Chief Chamberlain to His Majesty the Druk
Gyalpo and was conferred the Red Scarf and title
of “Dasho” in 2008 for his distinguished service
to the Nation. Before he was appointed as the
Governor, he was the Chief Executive Officer of
the National Pension and Provident Fund (NPPF) .
Dasho holds a Master’s degree in Economics from
the Northwestern University, Boston, USA.
His Majesty awarded the Druk Thuksey (Heart-

son of Bhutan) medal to Dasho Penjore during the
MEMBER
M
110th National Day Celebration on December 17,
2017 for his dedicated service to the Nation. r. Thinley Namgyel is the Secretary of
Gross National Happiness Commission
Secretariat. He has a Master’s
degree in Business Administration from the
University of Canberra, Australia.

MEMBER
M
MEMBER r. Phajo Dorjee was appointed as the
Deputy Governor of RMA in June 2015.
M
r. Tashi is Zimpon Wogma (Deputy Prior to his appointment as Deputy
Chamberlain) under His Majesty’s Governor, he served the RMA as the Director of
Secretariat. Mr. Tashi is a certified IDI/ the Department of Banking and Department
INTOSAI Training Specialist. After completing of Currency Management. He holds a Master’s
his Bachelors of Commerce degree from degree in Public Administration and Economic
Sherubtse College in 1993, he pursued Policy Management from Columbia University,
his studies at the Chartered Institute of USA.
Management Accountants in London and
obtained an Advanced Diploma in Management
Accountants.
MEMBER
MEMBER
M
s. Yangchen Tshogyel was appointed
M
r. Sonam Tenzin is the Director of as the Deputy Governor of RMA in
Department of Trade, Ministry of September 2016. Prior to her appointment
Economic Affairs. He served as the as the Deputy Governor, she served as the
Executive Director of the newly established Director of the Department of Macroeconomic
Office of the Consumer Protection from January Research and Statistics. She has a Master’s
2014 to January 2016. He holds a Master’s degree in Public Policy, with specialization in
Degree in Management Studies (MMS) with Economic Policy from the Australian National
specialization in Finance and Accountancy. University, Australia.

Organizational Chart
Board of Directors
Board Audit Committee
Governor Executive Committee
Deputy Governor Governor’s Office Deputy Governor
Department Information
of Internal Security Steering
Audit Committee
Department of
Department of
Macroeconomic
Financial Regulation
Research & Statistics
& Supervision
Department
of Banking
Financial Intelligence
Department
Department of Foreign
Exchange & Reserve
Management
Department of
Currency Management
Department of
Information
Department Technology
of Administration
and Finance
Department
of Payment &
Phuentsholing Settlement Systems
Regional Offices
Mongar

Executive Directors and Directors
Mr. Jai Narayan Pradhan

Executive Director Ms. Tshering Dema
Department of Currency Director
Management Department of
Banking
Mr. Sherab Jamtsho

Director
Department of
Mr. Namgay Tshering Information Technology
Executive Director
Financial Intelligence
Department
Mr. Gopal Giri

Director
Mr. Phub Dorji Tangbi
Department of Macroeconomic
Executive Director
Research & Statistics
Department of Internal Audit
Ms. Gopi Nepal

Director
Department of Financial
Regulation & Supervision
Mr. Julien Gurung
Executive Director
Department of Administration
& Finance
Ms. Tshering Wangmo

Director
Department of Payment &
Settlement Systems
Ms. Dechen Pelzom

Executive Director Mr. Dophu Dorji
Department of Foreign Exchange Regional Director
& Reserve Management Phuentsholing
Regional Office

STAFF STRENGTH The Royal Monetary Authority is
delighted to honor the dedicated
A
s of August 2018, the RMA’s total service of the following senior
staff strength is 207. Of the total, 194
employees were stationed at the
officials who left the RMA in the
Head Office, while 10 employees were year 2018.
stationed at Phuntsholing Regional
Office and 3 employees at Mongar Regional
Office.
Gender Composition (%) Ms. Tendi Zangmo
Sr. Admin Assistant
Department of
Administration
and Finance
44%
M
s. Tendi was one of the senior most
staff of the RMA who superannuated in
56% 2018 with her life time service of more
than 37 years. She started her career at the
RMA in 1980 as a Stenographer (1980-1988), and
rose to the post of Personal Assistant to the
Managing Director and later to Sr. Administrative
Assistant at the Department of Administration
& Finance (2010- July, 2018). On her successful
superannuation in 2018, the RMA takes a great
Job Level Number
pride and admiration for her dedicated services.
Management 3 The RMA wish her a healthy and fulfilling life
ahead.
Executive Directors/Directors/
94
Officers
General Support Staff 110
Following were the key Ms. Rinzin Lhamu

areas of deliberation made Executive Director
Department of Payment
by the Board during 2018: and Settlement Systems
Rules and Regulation on commercial
M
v
banks, insurances, reinsurances, s. Rinzin voluntarily resigned from the
e-money issuers, CSI banks, micro RMA in 2018, under the early retirement
–finance, payment and settlement scheme. Ms. Rinzin initially started her
system, foreign exchange and Credit career as a Trainee Officer in February 1, 1991.
Information Bureau. She served the RMA under several capacities
during her long tenure, extending more than 27
v BAS Accounting Policy, Whistle Blowing
years. A brief profile of her career progression at
and Reserve management
the RMA is as follows;
v Guidelines on Priority Sector Lending.
v Trainee officer (Feb. 1991 - Jan. 1992)
v Anti-Money Laundering and Terrorist v Assistant Supervisor, DFRS (May 1992–Dec.
Financing. 1998)
v Strategy documents on National v Banking Officer, DB (Jan. 1999 – Dec. 2000)
Financial Inclusion and National v Research Officer/Director, DMRS (Jan. 2001 –
Financial Literacy. Dec. 2006)
v Director, DB (Jan. 2007 – Jan. 2011)
v Core banking system –Druk MicroFin.
v Director, DCM (Sept. 2012 – Jul, 2016)
v Opening of Regional Office (at P/ling v Executive Director, DPSS (Jul, 2016 – Jun, 2018)
and Mongar) and Currency Exchange
Counters at Paro, Mongar and P/ling. The RMA family takes the opportunity to extend
our sincere thanks and appreciation for her
valuable contribution and dedicated service to
the Nation. The RMA wishes her a healthy and
prosperous post retirement life ahead.

an Accounts Assistant, Accounts

In-Charge in the Department of
Banking and as a Joint Custodian
Obituary
in the Department of Currency
Management. He also served in
the Department of Payment and
Settlement Systems as a Clearing
Assistant and as a Foreign Exchange
Assistant in the Department of
Foreign Exchange and Reserve
Management.
In 2018, he was placed as the RMA mourns the

Mr. Dupsang Tamang Officer In-charge of the Regional untimely demise of
Officer In-charge Office to set up the new office Mr. Karma Rinzin, who
Regional Office, Phuentsholing. at Phuentsholing. With a long was a dedicated and
M
outstanding and dedicated career hardworking senior
r. Dupsang is one of at the RMA, for more than 31 years, official of the RMA.
the senior most staff Mr. Dupsang superannuated in
of the RMA. His service December 31, 2018, after receiving
at the RMA initially started as a life time service award from
a Note and Coin Examiner in His Majesty the Druk Gyalpo. The
the Department of Currency RMA family takes great pride and
Management on August 19, admiration for his long dedicated
1987. He served the RMA service and wish him and his family
in several capacities - as a healthy and fulfilling life ahead.

Knowledge Management
I
n order to build a highly professional and To build an efficient and motivated human
dynamic human resource capability to resources, the “Inter-Departmental Transfer
carry out RMA’s mandates and functions Guidelines” was implemented in January 2018 to
efficiently, the RMA officials continued provide employees with opportunity to acquire
to attend various Courses, Seminars, varied job experiences and career enrichment
Workshops, Trainings and Meetings within within the RMA. Moreover, to ensure a systemic
and outside the country. Some of the notable and holistic development of human resources
trainings and courses attended by the RMA in the organization, the HRD Plan has also been
officials are featured given below. finalized.
Managerial Development Policy and Planning

v Macroeconomic Management and Fiscal
Development
Policy.
v Regulation, Supervision and Monitoring of
v Macroeconomic Diagnostics and Monetary
Financial Institutions.
Policy.
v Fiscal Management and Sustainability.
v Corporate Governance.
v Investment and Management of Foreign
v Regional Economic and Financial
Exchange Reserves.
Monitoring.
v Anti-Money Laundering & Combating the
v Annual Meetings: IMF-ADB,
Financing of Terrorism.
SAARCFINANCE Governor’s symposium,
v Domestic Credit Rating, Stress Testing,
ACU, AFI Global Policy Forum and APG.
Capital Adequacy and Supervision &
Financial Soundness Indicators.
Operational Development v Financial Programming and Policies (FPP).
v Payment & Settlement System & Financial
v Currency Management. Switch.
v Prudential Asset Classification and v Capital Market Development.
Provisioning and the IFRS. v External Debt Management & Financial
v Training on Effective Management for Market Analysis.
Secretariat. v Compilation of Balance of Payments,
v Capacity Building Seminar on Financial International Investment Position
Inclusion in Asia-Pacific. Statistics & Monetary & Financial
v Server and Network Configurations, Third Statistics.
Party Software, Oracle, Database, Network v Financial Inclusion & Literacy Program.
Administration and Management. v Consumer Protection & Market Conduct
v Talent Development and Human Program.
Resources Management. v SAARCFINANCE Staff Exchange Program.

Dasho Governor with RMA staff and monks of Paro Rabdey during the hoisting of prayer flags and feast offering at
Chelela on April 29, 2018.
Social Club Activities : FY 2017/18
T
he RMA Social Club is an initiative of i. The Club members along with other staff from
Dasho Governor. The club was formed the RMA rendered voluntary services during the
on March 25, 2016, with the objective of reconstruction of the historical Drukgyel Dzong at
taking additional responsibilities beyond Paro on March 17, 2018. The Club members also
the normal official duties. The Social made contribution during the renovation work
Club provides welfare support to RMA staff during of Lhading Lhakhang at Paro on August 4, 2018.
difficult times and promotes social integration by During the event, the RMA also sponsored lunch,
way of offering community services which are of tea and offered cash to the site workers.
national importance.
ii. For the well-being and happiness of all the
Currently, the Club consists of a President, Vice sentient beings, the Club also initiated hoisting
President and 30 members, nominated through of prayer flags and feast offering on April 29, 2018.
a secret ballot. Some of the activities undertaken Hoisting of prayer flags were presided by the
by the Club during FY 2017/18 includes the monastic body of Paro Dzongkhag.
following:
Voluntary labour contribution by RMA staff at Lhading Voluntary labour contribution by RMA staff at Drukgyel
Lhakhang at Paro on August 4, 2018 Dzong re-construction at Paro on March 17, 2018.

2
Key Macroeconomic
Highlights

Key Highlights- FY 2017/18
Macroeconomic Developments
Sluggish GDP growth in 2017 Key drivers of economic growth in 2017

(Growth, %)
Real GDP growth (Growth, %)
5.1%
8.0 7.1%
Demand
6.6
Supply
5.6
Private
4.6 consumption Services
NU 2.4%
4.4%
2014 2015 2016 2017 Government
Manufacturing
consumption
Headline inflation moderated in FY 2017/18

Mainly contributed by
Headline inflation (Growth, %)
4.9
4.8
Nu.
3.6
2.6 2.2%
2.4%
Food prices Fuel prices
Decrease in vegetables, Fall in global
bread and cereal prices fuel prices
2014/15 2015/16 2016/17 2017/18
Trade & current account deficits persist

Current account balance (in % of GDP)
Total Export (Growth,%)
7.8 8.0
Current
account
balance Goods Services Primary Income
Secondary
-2.3 -2.0 Income
-8.9 -8.6
12.5% 5.4%
-16.4
-19.0 -8.9%
-21.0
-24.3 2015/16 2016/17 2017/18

2016/17 2017/18
Accommodative Depreciation
Increase in domestic
production capacity
monetary and
fiscal policies
S of exchange
rate

Key Macroeconomic
Highlights
Fiscal deficit remained manageable

60
Budgetary operations
Mainly contributed by (in % share)
(Nu. in billion)
50
Revenue Expenditure
40
30
68.1% 48.8%
20
Domestic Current
revenue
$ $ $ $
10 Money supply (M2) 31.5
(Growth, %)
0
31.9% 51.2%
2014/15 2015/16 2016/17 2017/18 Grants Capital
Revenue Expenditure
15.8
$$ $$
10.4
Money supply growth slowed down
7.8
but continued to remain volatile
2014/15 2015/16 2016/17 2017/18
Sources of Money supply (Growth, %) Monetary policy

Money supply (M2) 31.5 29.5
(Growth, %) Fixed exchange
rate served as
nominal anchor for
17.9 maintaining price
15.7
15.4 stability
15.8 CRR is the only

monetary policy
tool for liquidity
0.6 management
10.4
7.8
-3.2
2014/15 2015/16 2016/17 2017/18 2016/17 2017/18
Net foreign assets Domestic credit Private sector credit

Sources of Money supply (Growth, %)
29.5
Financial sector remained

17.9 resilient to economic vulnerabilities
15.4 15.7
28.7
Financial soundness indicators of
the FIs as of June 2018 (in % Share)
Trade & commerce
NPL: 21.3%
0.6 Share to total loan: 13.9%
16.2 -3.2
2016/17 2017/18
Services & tourism
Net foreign assets 11.5 Domestic credit Private sector credit NPL: 19.3%
$ $
Share to total loan: 23.1%
3.9
0.5
Housing
RWCAR NPL ROA ROE SLR NPL: 17.9%
Share to total loan: 23.6%
RWCAR : Risk Weighted Capital Adequacy Ratio
$ $
NPL : Non-Performing Loan
ROA : Return on Asset
ROE : Return on Equity
SLR : Statutory Liquidity Requirement
$ $ RMA Annual Report 2018 25

Key Highlights- FY 2017/18
Policy initiatives and interventions
1. Financial Sector Regulations and Prudential measures

To further deepen the financial sector, protect against systemic risk and to pro-
mote governance, the RMA issued several regulations.
Rules and Regulations 4. Issued revised rules and regulation

on Credit Information Bureau (CIB) to
1. Given the immense potential of the CSI enhance the credit worthiness.
sector for economic diversification-domestic
production and employment generation, the 5. Issued revised corporate governance
Rules and Regulations for Cottage and Small rules and regulations for the financial
Industries (CSI) Bank was issued in July 2018, sectors.
to enhance access to finance.
Prudential Measures
2. Issued license for deposit taking Micro-Fi-
1. Issued directives on revised maximum
nance Institution to RENEW in August 2018.
loan to value ratio (LTV) from 50
3. Issued Rules and Regulations for insurance percent to 30 percent for motor vehicle
companies and re-insurances companies in loans with effect from August 2017.
July 2018. 2. Issued Macro-prudential regulations.
2. Reserve Management
Size and Composition Risk management REMIT BHUTAN

Official Foreign Re- Reserve management policy (2017) Others Africa
US$ 0.94 million (10%)
serves as of 30 June US$ Established general principles, US$ 1.73 million (9%)
1,107.91 million. investment structure, asset
classes, risk management and
Convertible Currency (CC) internal organization.
Reserves: US$ 876.34 Australia
million. Investment Guidelines (2018) US$ 1.73 million (18%)
Quantified investment frame- Sept. 2018
Indian Rupee Reserves: work.
US$ 234.57 million equiv- US$ 9.6
avlent. Reserve Management Operational Manual million
Defines rules to conduct reserve
Portfolio Investment: management transactions and
Cash, Deposits, Bills and activities.
Bonds.
Joined the World Bank RAMP USA & Kuwait
program for capacity building. US$ 6.10 million (63%)

Key Macroeconomic
Highlights
3. Gateway to Financial Inclusion
The National Financial Inclusion Strategy (NFIS) and National

h Financial Literacy Strategy (NFLS), 2018-2023 was launched on
August 30, 2018.
As an outcome of Initiated the Students Business Seedling (SBS) Program at

the inaugural summit the Desi High School, Thimphu on the command from His
of Bhutan Economic h Majesty the King to promote entrepreneurship and encourage
Forum for Innovative creativity and Innovation among students in March 2018.
Transformation (BEFIT) Jabchor-A platform for equity financing for startup business
conducted in May 2017,
the RMA in collaboration h was launched to commemorate the twelve years of His
$ $
Majesty’s benevolent reign on December 13, 2018.
with relevant agencies
initiated several activi- Youth Ethics (YE) Banking Incentive Day Program was observed
ties to promote financial on October 30, 2018; With YE Banking, the students of pilot
inclusion and literacy. schools (Arikha MSS, Wangsel Institute, Jigme Losel PS and
Bhutan YDF’s Young Volunteers in Action (YVIA) opened a
h total of 1,460 saving accounts with the BDBL and BNBL. The
total Bank Points (BP) achieved by all schools accumulated to
152,282 points; For 2018, with the adaptable incentive pegged
value to Bank Points as determined by the RMA, declared at
Nu. 2 per BP, a total of Nu. 0.31 million was paid out as total YE
Banking incentive payout for 2018.
Launched Druk MicroFin as integrated core banking solution

h to support the MFIs and CSI banks.
4. Unlocking Bhutan’s Digital Future:

Opportunities, Challenges and Policy Responses
Opportunities
• Possess huge potential and opportunity to
expand the financial services to the under-
Digital Financial Ser-
served and financially excluded society.
vices (DFS) delivers ba-
• Promote cashless banking and financial
sic financial services
inclusion.
to underserved and
financially excluded
segment of the society Challenges
through innovative • Cash remained a dominant and preferred
technologies like mode of payment system.
mobile-phone-enabled • Low trust and confidence in electronic pay-
solutions, electronic ment, given the lack of awareness.
money models and
digital payment plat-
forms. Policy response
• Payment & Settlement Systems Rules and
Regulations, 2018.
• E-Money Issuers Rules and Regulations 2017.
• Connection of Bhutan Financial Switch with
National Financial Switch of India.

Priority Sector Lending (PSL) Review Report,January-June 2018
Basic information on the PSL • 70% loan & 30% equity.

• Interest rate: 8.5%.
Agricultural CSI
• Eligibility- All PSL listed activities for
Number of PSL applications
Individuals, Groups & Cooperatives and received by Dzongkhags and FIs
incorporated Companies.
• Loan limit of Nu. 0.5 million for Individuals for During second quarter of 2018, a total of 584 PSL
primary production. applications were received by the Dzongkhags,
• Loan limit of Nu. 10 million for Groups and increasing from 97 in the first quarter of 2018.
Companies.
• 100% loan for primary production with Dzongkhag approved 513 projects, of which
Insurance-based. 78% were agricultural CSI and 22% were non-
• Interest rate: 8% primary production and 8.5% agricultural CSI.
for integrated agricultural CSI.
13 projects were withdrawn by the Clients, owing
Non-Agricultural CSI to high insurance and service fees.
• Loan limit of Nu. 10 million.
Number of PSL applications approved Number of PSL applications rejected

by Dzongkhag PSL Committee by Dzongkhag PSL Committee
120 115 12 11
100 99 10
80 8 7
65
60 6 5 5
4
4
34 37 4 3 3
40 2833 3
24 24 2 2
20 2 1 1
11 8 10 11 9
1 5 2 3 0 3
0
0 0 0 0 0 0 0
0
CHHUKHA
DAGANA
GASA
HAA
LHUENTSE
MONGAR
PARO
P/GATSHEL
PUNAKHA
S/JONGKHAR
SAMTSE
SARPANG
THIMPHU
TRASHIGANG
TRASHIYANGTSE
TRONGSA
TSIRANG
WANGDUE
ZHEMGANG
BUMTHANG
CHHUKHA
DAGANA
GASA
HAA
LHUENTSE
MONGAR
PARO
P/GATSHEL
PUNAKHA
S/JONGKHAR
SAMTSE
SARPANG
THIMPHU
TRASHIGANG
TRASHIYANGTSE
TRONGSA
TSIRANG
WANGDUE
ZHEMGANG
BUMTHANG
Categories of PSL applications Number of PSL applications

and demographic profile approved by FIs in Dzongkhags
60
53
of PSL applications were related
78% to agricultural CSI, concentrating 50
in primary production (livestock

40
& vegetable farming).
22%
30
of PSL applications were related
to non-agriculture CSI. 20 17
11 12
of applicants were in 31-40 10 6 7
5 6
4
38%
1 2 1 2
years of age group, 36% in 21-30
0
years,24% above 40 years and
BUMTHANG
CHHUKHA
DAGANA
GASA
HAA
PARO
SAMTSE
SARPANG
THIMPHU
TRASHIGANG
TRONGSA
TSIRANG
W/PHODRANG
2% were in 17-20 years of age

group.

Key Macroeconomic
Highlights
PSL loan sanctioned by the FIs in PSL loan disbursed by the FIs in
Dzongkhags as of June 2018. Dzongkhags as of June 2018.
(Nu. in million ) (Nu. in million )
Bumthang 8.6 Bumthang 1.9 Chhukha 9.3

Wangdi 6.5 Chhukha 24.9 Tsirang 1.7
Tsirang 10.2 Trashigang
Gasa 2.0 3.5
Gasa 1.6
Paro
Trashigang
10.3
11.9 Paro 3.6
Sarpang
3.2
Sarpang 0.02
Thimphu 58.3 Thimphu 19.6
Projects approved and loan sanctioned by FIs

(Nu. in million as of June 2018)
80
70 70.4
60
47.8
45
40
20 14.2
6 4
1 2.7 1 3
0.4
0 BOBL BNBL BDBL DPNBL Tbank RICBL
No. of PSL projects approved Loan sanctioned by FIs
Lessons learnt from the PSL implementation

• PSL proposals were largely agro-based and clustered around similar ideas, mostly involving
low-value primary production.
• Low level use of technology with lack of skills, innovative business ideas and creativity.
• Except for one or two groups, all proponents were Individuals and therefore projects were of
small scale and dispersed.

BHUTAN’S KEY MACROECONOMIC INDICATORS
Indicator 2013/14 2014/15 2015/16 2016/17 2017/18
GDP Growth and Prices (percent change)
GDP at Constant (2000) Price (a), (b) 2.14 5.75 6.64 8.02 4.63
Consumer Prices - June quarter (b) 8.55 5.19 3.31 5.45 2.57
Wholesale Prices (India) - June quarter (c) 5.13 -3.11 -0.69 2.33 4.57
Government Budget (in millions of Nu.) (d)
Total Revenue and Grants 37,819.12 36,231.05 42,039.30 42,673.13 54,666.72
Of which: Foreign Grants 14,236.35 9,955.02 14,889.61 12,986.75 17,433.08
Total Expenditure* 33,522.83 34,334.26 43,603.00 48,017.99 56,513.50
Current Balance 5,641.62 5,243.99 3,020.10 6,805.79 8,617.00
Overall Balance 4,296.29 1,896.79 -1,563.70 -5,344.86 -1,846.78
(in percent of GDP) 4.08 1.59 -1.18 -3.58 -1.12
Money and Credit (percent change, end of period)
Broad Money, M2 6.62 7.82 15.83 31.52 10.43
Credit to Private Sector 6.44 14.00 14.67 15.39 15.69
Interest Rates (end of period)
One Year Deposits 5.0-6.5 4.0-7.0 4.0-6.5 5.0-6.0 5.0-5.75
Lending Rate 10.0-16.0 11.7-17.0 11.7-15.0 8.0-14.0 9.9-13.0
91-day RMA Bills/Treasury Bills 2.28 0.13 5.50 0.65 2.52
Balance of Payments (in millions of Nu.)
Trade Balance(Goods) -24,170.51 -26,662.76 -35,519.11 -31,149.17 -26,959.11
With India -17,362.45 -18,963.13 -28,878.42 -24,303.76 -25,146.64
Current Account Balance -30,116.10 -34,177.40 -41,436.09 -36,142.83 -31,306.95
(In percent of GDP) -28.58 -28.59 -31.37 -24.31 -19.02
With India -25,594.89 -28,684.94 -38,312.61 -34,006.52 -34,479.42
(In percent of GDP) -24.29 -23.99 -29.01 -22.87 -20.94
RGOB Loans 15,331.40 17,838.32 30,052.75 13,078.38 6,079.24
Of which: India 12,742.01 16,600.36 28,574.07 10,093.09 36,00.00
Errors and Omissions 3,179.18 -1,505.16 -1,944.53 6,422.74 1,124.49
Overall Balance 4,280.49 -570.83 12,584.54 -1,565.30 4,865.19
(In percent of GDP) 4.06 -0.48 9.53 -1.05 2.96
External Indicators (end of period)
Gross Official Reserves in millions of USD 997.89 958.45 1,118.77 1,103.76 1,110.91
Reseves in months of merchandise imports 12.61 11.71 12.92 12.53 13.01
External Debt outstanding (USD millions) 1,758.96 1,854.58 2,315.59 2,505.43 2,642.07
External Debt (percent of GDP) 102.61 96.26 116.27 111.94 110.05
Convertible Currency debt outstanding (USD millions) 628.95 581.21 609.00 663.22 699.82
Convertible Currency debt (percent of GDP) 36.69 30.17 30.58 29.63 29.15
Rupee debt outstanding (INR millions) 67,870.15 81,183.64 11,5393.81 11,8770.09 13,3190.70
Rupee debt (percent of GDP) 64.41 67.91 87.37 79.88 80.90
Debt-Service Ratio (e) 22.71 19.82 12.81 24.87 23.40
Memorandum Items
(in millions of Nu. unless otherwise indicated)
Nominal GDP (a), (b) 105,378.35 119,545.75 132,080.85 148,678.93 164,627.92
Ngultrum per USD (fiscal year average) 61.47 62.05 66.32 66.43 68.58
Money Supply, M2 (end of period) 63,387.80 68,344.29 79,160.88 104,113.59 114,973.69
Money Supply, M1 (end of period) 39,701.84 41,675.50 44,931.78 60,723.28 66,295.05
Counterparts
Foreign Assets (Net) 53,886.46 58,248.74 67,815.59 68,186.68 66,006.28
Domestic Credit 52,299.01 56,255.12 65,692.70 85,084.84 100,320.53
Credit to Private Sector 49,838.67 56,820.54 65,157.15 75,185.09 86,985.09
Components
Currency Outside Banks 5,704.58 5,946.06 6,101.73 8,787.66 9,234.04
Transferable Deposits 33,997.26 35,729.44 38,831.90 51,935.62 57,061.00
Other Deposits 23,685.96 26,668.79 34,229.10 43,390.31 48,678.64
Reserve Money, M0 (end of period) 26,638.21 26,248.81 27,802.92 34,327.86 33,469.76

o.w: Banks’ Deposits 18,543.67 16,916.62 18,131.99 22,798.89 24,235.71
Money Multiplier (M2/M0) 2.38 2.60 2.85 3.03 3.44

Income Velocity (GDP/M2) 1.66 1.75 1.67 1.43 1.43
Unemployment Rate (a) 2.90 2.60 2.50 2.10 2.40
a) On a calendar year basis (eg: entry under 2015/16 is for 2015). b) Source: National Statistics Bureau c) Source:
Reserve Bank of India. Effective April 2011, the RBI has revised the base year from 2004/05 to 2011/12, creating a
break in the continuity and comparison of data. The newly calculated WPI commenced from the month of April 2011
onwards. d) Data for 2017/18 are revised estimates. e) Debt service payments in percent of exports of goods and
services. * Total expenditure includes net lending and other payments.

3
Macroeconomic
Review FY 2017/18

3. Macroeconomic review 8.0% 2016
3.1 Real Sector 6.6%

2017
The growth dynamics continue to be 2015 4.6%
guided by the hydro power development
and domestic inflation is strongly Economic growth slowed down in
correlated with that of India. 2017 to 4.6% from 8.0% in 2016
W
ith slowdown in hydro power a 10.7 percentage points increase in consumer
investment, the economic growth spending revealed that the economy continues to
dipped to 4.6 percent in 2017 be consumption oriented.
against 8 percent growth in 2016. In
consideration to the nearing completion of three Similarly, due to increase in tourism demand
mega projects, the hydro investment resulted in and unexpected growth in external demand
8.1 percentage points drop in the overall private for domestic manufactured goods and mineral
investment demand. products, the overall exports increased by
11.6 percent in 2017. Simultaneously, slowing
The modest growth was primarily supported import demand through subdued hydro power
by endured fiscal expansion and restoration investment curtailed the external demand.
of private consumption spending. The higher
investment for public infrastructure development On the production front, unfavourable
and increased capital grants disbursement to hydrological flows for electricity generation and
public entities expanded government investment dwindling hydro power construction activities has
demand by 23.4 percent in real terms. decelerated economic growth in 2017. Electricity
production comprised 15 percent of total output,
Upward government spending, moderate inflation a 3.8 percent point drop in electricity and a
level, improved access to credit and enhanced sharp slowdown in construction activities at 6.3
external demand on domestic products, along percent (2016:13.6%) during the year were main
with higher disposable income supported contributors for slower GDP growth.
the growth recovery of private consumption.
Given that almost 55 percent of total domestic On the upside, with gaining momentum of
expenditure is composed of private consumption, private consumption spending, expansionary
Chart 3.1.1: GDP growth and sectoral

contribution by expenditure
30
15
% Change
6.6 8.0
5.7
4.6
0 1.4
-15
-30
2013 2014 2015 2016 2017
Investment Net exports Consumption GDP growth rate

Macroeconomic Review
Chart 3.1.2: GDP growth and sectoral growth

contribution by production
10 Electricity
Mining
8.0
Financial services
% Change
6.6
6 5.7 Agriculture
4.6 Trade & restaurant
Transport & communication

2.1
2
Construction
Social services
Manufacturing
-2
2013 2014 2015 2016 2017 Public administration
GDP growth rate
fiscal operations boosted industrial and mining Given the limited domestic productive capacity,
production by 5.5 percent and 7 percent a sizeable portion of domestic demand is met
respectively. Likewise, a resilient demand in externally. Further, with the weak export-oriented
tourism sector (21.5% growth), production in manufactured products to meet external demand
transportation and restaurant services attained a has resulted persistent trade deficit. Therefore,
maximum growth at 12 percent and 11.1 percent the economic growth firmly anchored on domestic
respectively. This has been further boosted by the demand. The increase in real domestic demand
expansion of financial services through a financial by 2.7 percent translated into Nu.32.04 billion
inclusion and priority sector lending program. imports, constituting 40 percent of total demand.
At the same time, excessive aggregate demand
Meanwhile, the Government’s commitment for with a higher saving-investment gap posed serious
extending quality health and education services external imbalances-resulting into high current
through enhanced fiscal and monetary program account deficit and depletion of international
witnessed a reasonable level of growth in social reserves.
services (by 5.8%).
Chart 3.1.3: GDP growth and aggregate demand
30
20
% Change
10
0
-10
-20
-30
2010 2011 2012 2013 2014 2015 2016 2017
Demand growth rate GDP growth rate Net exports (% of GDP)

3.2 Inflation
Headline inflation declined to 2.6 % as of June 2018
I
n the midst of increased domestic demand, significant fall in the vehicle import prices1.
headline inflation was at record low of 2.6
percent in June 2018 (June 2017:5.9%). It Equally, underlying inflation, as measured by the
was primarily the enduring effect of fall in core inflation (excluding food and energy prices)
the crude oil prices in 2018 and impact of dropped significantly at 1.1 percent in June
second-round effects of declining fuel prices on 2017, compared to 3.7 percent in the previous
food and other non-food prices. Moreover, due to year. The deceleration in housing inflation, fall
Goods and Services Tax (GST) implementation in in the price of vehicle purchase, transportation,
India, since the last quarter of 2017, there was a communication and recreation services are
Chart 3.2.1: Headline and core inflation
14
12
10
% Change
8
6
4
2
0
2014 2014 2014 2015 2015 2015 2016 2016 2016 2017 2017 2017 2018 2018
M2 M6 M10 M2 M6 M10 M2 M6 M10 M2 M6 M10 M2 M6
Headline inflation Core Inflation (excluding food & fuel) Food & fuel inflation
the key determinants of

Chart 3.2.2 Contribution to non-food inflation subdued core inflation.
by components (% share)
During the period, non-
food inflation plummeted
below 1 percent against 3.9
percent in June 2017. Apart
from fuel and vehicle prices,
the increase in residential
supply through easy access
to housing loan resulted
into speedy disinflation in
house rent resulting into
reversed non-food inflation
trend. Consistently, other
non-food inflation sustained
1
The price of vehicle imports from India is estimated to fall by 14-21 percent with the waiving off excise
duty on vehicles under the new Goods & Services Tax regime in India.

at an initial level along

with moderation in the Chart 3.2.3 Contribution to food inflation
non-food commodity by components (% share)
prices at global market.
Inflationary pressure
in food items remain
elevated within 5-6
percent even though a
slowdown was witnessed
in domestic vegetable
price level. Externally,
constant increase in
food prices in India due
to supply disruptions
and spillover effects
from global prices have Chart 3.2.4 Contribution by domestic
impacted the food and imported inflation (% share)
inflation in Bhutan.
Amongst food items,
import prices of cereals,
fruits and vegetables have
risen during the period.
Since a large portion of

domestic demand is met
through external supply,
imports constituted
almost 52 percent of
the consumer goods in
Bhutan, largely sourced moderating overall price level in Bhutan. Despite,
from India. Due to strong trade integration rising domestic consumption demand, weakening
favored by geographical proximity and pegged of import prices was adequate to maintain overall
exchange rate arrangement with India, the inflation at abyss, reflecting exogenously driven
inflation in Bhutan closely tracks the price inflation.
movement in India. Except for selected food
items, low level of non-food commodity prices Domestically, a lower rate of inflation emanated
both in India and global market has favored largely from deceleration in housing inflation,
and direct and indirect pass through effect of
falling global fuel and vehicle prices in India.
Chart 3.2.5 Trend in Bhutan & India inflations Moreover, enhancement in agriculture output
10
Bhutan through continuous policy interventions also
8
India
helped to soften the domestic food inflation.
% change
6 Except for the periods of abrupt policy changes

such as demonetization, implementation of
4
inflation targeting monetary policy and GST
2
implementation in India, inflation in Bhutan
and India are strongly correlated.
0
Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2014 2015 2016 2017 2018

3.3 Labor supply and employment
Unemployment recorded at 2.4 %, while youth unemployment
remains at 10.6 % in 2017
A
lthough overall unemployment level constitutes 10.3 percent, accounting 54 percent
has been estimated within the natural of total unemployment . The unemployment rate
rate of unemployment, the labor among educated youth is five times higher with
market in Bhutan is characterized a university graduate and two times higher for
by structural issues. In 2017, overall secondary education level as compared to average
unemployment rate was low at 2.4 percent, but youth unemployment rate of 13.2 percent in
youth unemployment was almost five times of 2016.
national unemployment. About 60 percent of
total employment was in agricultural sector, on The persistent mismatch of skills between the
the contrary, the share of agriculture to GDP demand and supply in the labor market is a
constitutes less than 15 percent. Employability critical factor for rising youth unemployment.
Chart: 3.3.1 Labour force participation and unemployment rate
70 18
68.6 13.2
68 67.4 15
Labour force participation rate
10.7
Unemployment rate (%)

9.6 10.6
66 9.4
9.2 9.2 12
64.4
7.3
(LFPR)
64 65.3 63.1 63.3 9

62.6
62.2
62 6
3.3
3.1
60 2.9 2.4 3
2.1 2.6 2.1
2.5
58 2010 2011 2012 2013 2014 2015 2016 2017 0
LFPR Overall unemployment rate Youth unemployment rate
falls with the education level. Of the total For instance, in 2017, as indicated by available
unemployed persons, 70 percent remained vacancies, the demand for middle higher
unemployed for more than six months. With the education with certificates and diploma
gradual increase in education level among the constitutes about 54.7 percent, whereas only
labor force, labor force participation rate (LFPR) 20.8 percent were for university graduates. The
improved at 63.3 percent in 2017 (2016:62.2%). employability among educated youths with skills
The LFPR is much lower in rural areas compared were much higher than the general graduates.
to urban areas and is higher among the male
population. In terms of employment by economic sectors,
agriculture is the principal sector for absorbing
Of the given labor force of 354,652, the youth 57.2 percent of total employment. The
2
Reference to labor market analysis is based on 2016 data and labor market information for 2017 is
sourced from Population and Housing Census of Bhutan (PHCB),NSB.

Chart 3.3.2 : Youth unemployment by education level

(in numbers & % Share)
Bachelors degree 496 (33%) 1,020 (67%)
Higher secondary 6,868 (74%) 2,458 (26%)
Middle secondary 5,868 (85%) 997 (15%)
Religious professionals 635 (93%) 50 (7%)
Primary 3,175 (96%) 136 (4%)
Lower secondary 3,816 (98%) 73 (2%)
No formal education 10,861 (99%) 80 (1%)
Employed Unemployed
employment in agriculture sector, characterized compared to non-agriculture workers in the

by low skilled laborers and having minimum urban areas. Meanwhile, industry sector largely
contribution to total output, the labor productivity supported by the electricity generated a minimum
in agriculture sector is three times lower than employment, specifically for highly skilled
the average annual overall labor productivity professionals in contrast to its production. The
of Nu. 474,245 in 2016. As per the Bhutan employment level in the service sector has been
Living Standard Survey 2017, large share of increasing, accounting about 32.9 percent of
rural populace depended on agriculture sector total employment, relatively proportional to its
which also recorded higher poverty incidence, contribution to gross output.
Chart: 3.3.3 Sectoral employment & GDP share
60
57
42.8 42
45 41 40.4
Shares (%)
30
33
16.7 17
15
10
0
Agriculture Industry Services
GDP share (2010) GDP share (2016) Labor share (2016) Labor share (2010)

3.4 Fiscal Sector
Fiscal deficit recorded at 1.1 % of GDP during FY 2017/18
T
he budgetary operations of the double of the first year’s capital budget. Following
Government remains within the a constant build-up in capital in the past, the
prudential limits prescribed by the maintenance expenditure has increased over the
Public Finance Act 2007. During the years. Similarly, expansion in public employees
FY 2017/18, the fiscal deficit recorded by 3.9 percent in 2017 and periodic salary
low at 1.1 percent of GDP, with a surplus primary revisions, expenditure on pay and allowances
balance. comprised more than 40 percent of total current
expenditure. The establishment of state-owned
In the final budget of the 11th FYP, Government enterprises during the Plan put extra pressure
spending limit was almost 20 percent higher for capital and current grants and subsidies,
than the previous expenditure outlay. However, accounting 15 percent of total expenditure.
higher mobilization of domestic revenue and
external grants has positioned overall fiscal deficit Despite limited revenue enhancement measures,
Chart 3.4.1 Revenue, expenditure and fiscal balance (in % of GDP)

40 6.0
Revenue & expenditure
4.1 3.0
30
Fiscal balance
1.6
20 -0.0
-1.2 -1.1
10 -3.0
-3.6
0 -6.0
2013/14 2014/15 2015/16 2016/17 2017/18 (P)
Revenue & grants Expenditure plus net lending Fiscal balance
comfortably below the target of 3 percent of GDP. the increase in collection of domestic revenue
Owing to minimal fiscal deficit, a surplus primary was primarily due to increased domestic demand
balance of about one percent of GDP reflects fuelled by growth in real disposable income.
motivation of creating some fiscal space for the
future use. Driven by increasing domestic demand, additional
excise duty refund has been collected for the
The aggregate demand in the economy was imports from India, and enhanced sales and
largely supported by the substantial expansion in business income tax from expansion in trade and
Government expenditure, recording 35.6 percent retail business. With the implementation of GST
of GDP. In the review period, following the fiscal in India, fall in price of selected imported goods
consolidation process at the end of 11th FYP, impacted revenue collection from international
spending on infrastructure and other economic trade. In addition, large disbursement of grants
activities accounted more than one third of the from development partners was able to finance
capital budget. The enhanced capital expenditure almost 60 percent of the capital expenditure.
towards the end of plan period was almost During the FY 2017/18 , the fiscal deficit recorded

low at 1.1 percent of GDP, with a surplus primary the corporate entities and the RMA, and
balance. As a result, the pressure on the current domestic Treasury Bills, the outstanding debt for
account deficit was limited to 19 percent of GDP, Government fiscal operation increased to Nu. 27.4
lower than 24.2 percent of GDP in FY 2016/17. billion at the end of FY 2017/18, equivalent to
16.7 percent of GDP.
Accordingly, the financing requirement from
both domestic and external sources were lower As an alternative source of financing for
due to managed fiscal deficit. Of the total deficit investment in financially viable sectors and
financing, almost two third were availed from for infrastructural development that has fiscal
domestic market borrowings, accounting 13.2 dividend, budgetary borrowings were incurred
percent of total domestic credit flow (Nu.16.24 without distressing fiscal sustainability and
billion). Largely on the part of improved fiscal crowding out private sector investment. For
stance and timely disbursement of external which, non-hydro budgetary loan has been always
grants, dependence on Treasury Bills for financing maintained within the threshold prescribed in
short term cash deficit was also minimized. This the Public Debt Policy and almost 100 percent is
has limited crowding out effect on private sector, external debt which are largely in concessional
supporting quick recovery of both private sector terms. However, the estimated depreciation
consumption and investment demand other than of Ngultrum against US dollar by 6.5 percent
hydro power investment. has directly impacted the cost of external debt
servicing and expanded the level of external debt
Excluding the hydro power, loan availed by stock.
Chart 3.4.2: Government budgetary debt
30
20
18.2
Nu. in billion
16.7
16.3 16.4
15.6
23.3 27.4
10 21.7
19.2 19.5
0
2013/14 2014/15 2015/16 2016/17 2017/18 (P)
External debt Budgetary debt (% of GDP)

5. External Sector electricity & mineral products, indicating a
T
low product diversification. Meanwhile, the
he health of the external sector is top ten imports constitute about 30 percent
mirrored through the developments in of total imports, contributed largely by fossil
the real, fiscal and monetary sectors. fuel. Statistics shows that the import value has
The nexus of the above three sectors doubled the export proceeds. For instance, export
translated into the level of current proceeds from electricity (Nu.11.99 billion) was
account deficit, its financing requirements, just sufficient to cover fuel import bill from India
pressure on international reserves and the (Nu. 9.53 billion).
exchange rate arrangement.
In terms of direction of trade, India continues to
Bhutan’s external imbalance continues to remain the largest trading partner, constituting
reflect underlying economic fundamentals of 84.8 percent of total export followed by
high dependency on imports (including a large Bangladesh, Italy and Netherlands. Nepal, Hong
expatriate labor force), grant, aid and debt. Kong, Germany and Japan also appeared in the
However, during the FY 2017/18, due to decrease top ten export destination during the FY 2017/18.
in merchandise trade deficit and increase in Similarly, India, South Korea and Japan are the top
Chart 3.5.1 Major components of current account balance

15
-5
% of GDP
-15
-25
-35
-45 2013/14 2014/15 2015/16 2016/17 2017/18 (P)
Secondary income Primary income Services
Merchandise trade Current account balance
capital and financial inflows, the overall balance of three import sources for Bhutan.
payment upturned to positive.
On the service front, the trade-in-service account
However, both trade and current account deficits deficit decreased slightly by 1.8 percent to Nu.
continues to remain elevated during FY 2017/18. 3.35 billion in the FY 2017/18, compared to Nu.
The current account deficit improved to 19 3.41 billion in the FY 2016/17. Within this, higher
percent of GDP, compared to 24.2 percent of GDP receipts were contributed by increase in earnings
during the previous year. The improvement was from Indian tourists recording Nu. 2.99 billion as
primarily due to narrowing of merchandise trade compared to Nu.1.19 billion in the previous year.
deficit from Nu. 31.15 billion in the FY 2016/17 The net primary income deficit registered at Nu.
to Nu.26.96 billion in the FY 2017/18. This was 14.19 billion in FY2017/18, recording 7.4 percent
reflection of increase in merchandise export by growth from the previous year. The increment
5.4 percent, aided by drop in merchandise import was due to increase in interest payment by 7.4
by 3.2 percent. percent on Indian Rupee (INR.12.14 billion) and
Convertible Currency (USD 22.75 million) debt.
About 60 percent of total export constitutes
The net surplus in the secondary income

Chart 3.5.2: Trade composition as of 2017

(in % share)
Electricity 32.1
Ferro silicon 25.9
Cardamom 3.6
Pozzolana cement 3.3
Base metal 2.8
Dolomite 2.8 Top 10 Exports
Calcium carbide 2.3
Silicon carbide 1.9
Boulders 1.9
Ordinary cement 1.6
Diesel 9.9
Petrol 2.9
Iron ore 2.8
Turbine 2.7
Rice 2.5 Top 10 Imports
Machinery 2.2
Coke and semi-coke of coal 2.0
Wood charcoal 1.9
Electrical apparatus 1.7
Vehicles 1.5
5
Chart 3.5.3 Workers remittances
4
Nu. in billion
0
2013/14 2014/15 2015/16 2016/17 2017/18
India-Outward COTI-Outward COTI-Inward

Chart 3.5.4: FDI inflows
1.5
1.0
Nu in billion
0.5
-0.5
-1.0
-1.5 2013/14 2014/15 2015/16 2016/17 2017/18
Equity Re-investment earnings Inter-company debt
increased to Nu. 13.19 billion from Nu.11.63 form of equity injections, reinvestment of earnings
billion of the previous year, mainly due to increase and inter-company debt inflows.
in disbursements of Convertible Currency grants,
and a receipt of excise duty refund of Nu. 4 billion Total outstanding external debt stood at USD 2.65
from the GoI. billion as of FY 2017/18, reflecting an increase
of USD 136.64 million from the previous year. Of
During the review period, due to decline in the total external debt, 73.5 percent (INR 133.19
hydropower capital transfer, the net receipts in billion) constitutes INR debt and USD 699.82
capital account was recorded at Nu. 11.88 billion, million in the form of Convertible Currency. Within
which is 4.1 percent lower than previous year. the INR debt, about 89.7 percent were related
While the financial account increased by 75.7 to hydropower projects and the remaining was
percent from Nu. 15.77 billion in the previous incurred to meet balance of payments deficit with
year. The increase was attributable to FDI inflows India. Of the total Convertible Currency debt, the
amounting to Nu.218.92 million, mainly in the concessional public debt constitutes 95.7 percent
Chart 3.5.5: External loan composition

200
150
Nu in billion
100
50
0 2013/14 2014/15 2015/16 2016/17 2017/18
Hydropower loan (India) Non-hydropower loan (India) Public & publicly guaranteed loan
(COTI-Concessional)

and 4.3 percent were related to private sector. Deposits, and trade credits and advances of USD
59.9 million and USD 49.5 million respectively.
Consequently, the international reserves
amounted to USD 1.11 billion in June 2018, Total external financial liabilities increased by
compared to USD 1.10 billion in the previous 4.9 percent to USD 3.50 billion as of June 2018.
year. The international reserves were adequate to The increase in financial liabilities was mainly
meet 13 months of merchandise imports, which is driven by loans, comprising 92 percent of total
equivalent to 42.5 percent of external debt. financial liabilities. The external loan increased
to USD 3.22 billion from USD 3.06 billion of the
previous year. The Currency and Deposits, trade
International Investment
credits and advances and Special Drawing Rights
Position (IIP)* also represents the total external liabilities of the
economy.
As of June 2018, the volume of total external
financial assets amounted to USD 1.15 billion, As a result, the international investment position
a decrease of 3.1 percent from previous year. of Bhutan stood at negative, amounting to USD
Majority of assets (USD 1.04 billion) represents 2.36 billion as of June 2018.
the reserves asset followed by Currency and
Table: 3. 5.1 International Investment Position (USD in million)

Jun-17 Jun-18
Item Jun-13 Jun-14 Jun-15 Jun-16
(p) (p)
Net IIP -920.83 -1,101.47 -1,343.76 -1,716.25 -2,235.85 -2,353.24
Assets 1,031.29 1,107.02 1,053.05 1,255.08 1,104.86 1,150.26
Currency and deposits 63.97 64.60 64.43 60.35 60.06 59.90
Trade credits 49.47 44.74 30.02 48.70 59.85 49.47
Reserve assets 1
917.85 997.69 958.61 1,139.94 980.07 1,035.61
Liabilities 1,952.12 2,208.49 2,396.81 2,971.33 3,340.70 3,503.51
Direct investment in Bhutan 128.77 163.50 168.94 170.02 151.44 138.71
o.w. Equity 103.28 120.33 126.47 128.25 124.30 113.11
o.w. Intercompany debt 25.49 43.17 42.47 41.77 27.14 25.59
Currency and deposits 88.55 100.85 85.68 86.72 95.13 97.52
Loans 1,710.50 1,921.95 2,106.87 2,683.38 3,055.42 3,223.60
Trade credits 15.29 12.93 26.90 22.83 30.38 35.26
SDR allocations 9.01 9.26 8.42 8.38 8.33 8.42
Exchange rate to USD (end of period) 59.70 60.09 63.75 67.62 64.47 68.58
1
Excludes US dollar pledge on any outstanding overdraft as of the reference date (Differences in value of reserve
assets reflected here from gross international reserves appearing elsewhere in the report may be due to exchange
rates for individual components); Revisions made to this series: (1) SDR holdings and allocations were sourced from
the IMF website and valued using relevant end of period exchange rates. (2) Coverage of data on trade credits and FDI
are being continuously improved. (3) From June 2013 onwards, C&D liabilities include accrued interest where available.
*
The IIP is the financial statement that depicts the values of country’s external financial assets and liabilities. The
difference between country’s international financial assets and liabilities is the net international investment position.
Positive net IIP indicates that the nation is the creditor while negative indicates a debtor.

Exchange Rate Developments
Among other major currencies, the Japanese Yen
In terms of June-to-June comparisons, the depreciated against the US dollar by 1.2 percent,
Ngultrum depreciated by 5.2 percent from Nu. while Euro appreciated by 8.7 percent against US
64.4 against the US dollar in June 2017 to Nu.67.8 dollar compared to the previous year.
in June 2018.
Chart 3.5.6 Exchange rate: Nu/USD (Fiscal year average)

66.32 66.43 65.09
70
61.47 62.05
60 54.86
50.27
46.65
50 45.33
Nu. per USD
40
30
20
10
0 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18

3.6 Money and Credit*

Reserve Money1
T
he monetary development was characterized
by large volatility due to uncertainty of Reserve money (RM) or high-powered money
capital inflows particularly related to hydro signifies the Central Bank liabilities that influences
power projects, frequent recourse to government the expansion and contraction of broad money
borrowing to finance cash deficit, and change in supply. The behaviour of reserve money was
the currency demand. Due to absence of effective largely determined by the stance of liquidity
liquidity management operations and constant condition. The cash reserve ratio (CRR) is the only
build-up of excessive reserves in the banking monetary instrument so far used by the RMA to
system, the growth path of reserve money and manage the liquidity of the banking system.
money supply remained highly volatile. Other
combined macroeconomic factors such as The reserve money recorded negative growth
economic growth, level of inflation, interest rates of 2.5 percent in June 2018, due to dropped in
and exchange rate development also affected the bank’s deposit maintained at the RMA. With
demand for money. increase in digital payment and lower inflation,
growth in currency in circulation, which accounted
36.7 percent of total reserve money, slowed
down significantly to 6.4 percent from 19.2
Reserve money (M0)
fell by
percent during FY 2016/17. Banks’ deposit
(CRR and excess reserve) held with the RMA
also experienced a negative growth (7%) due to
2.5%
contributed by
decrease of deposits in the commercial banks.
Net foreign assets (NFA), key sources of reserve

decline in Net Foreign
money decline by 5.3 percent, owing to lower
Assets inflow of loans and grants. The change in reserve
money influenced the money supply through the
money multiplier effect.
Chart 3.6.1 Components of money multiplier

0.45 0.45
0.40 0.40
0.36 0.36
0.31 0.31
0.27 0.27
Ratio
0.22 0.22
Ratio
0.18 0.18
0.13 0.13
0.09 0.09
0.04 0.04
0.00 0.00
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
(Jun)
Reserve-deposit ratio Excess reserve-deposit ratio Currency-deposit ratio Money multiplier (RHS)
(*) For monetary analysis, the balance sheets of banks are classified within the framework of the Monetary and
Financial Statistics Manual (MFSM 2000) of the IMF. Data classification and computation done by the Department of
Macroeconomic Research and Statistics of the RMA are not directly comparable to those compiled and published by
the Department of Financial Regulation and Supervision.
1
Reserve money comprises of central bank liabilities such as currency in circulation, cash reserve requirement and
excessive reserves.

Money Supply (M2)
On monetary aggregate, the growth in money
10.4%
supply was recorded at 10.4 percent as compared
Money Supply
to 31.5 percent in the FY 2016/17, mainly on
account of lower growth in aggregate deposits
(M2) growth fell to
and decline in NFA. in FY 2017/18 from
The growth in aggregate deposits, which forms
92 percent of money supply decelerated by 10.9
percent in the FY 2017/18. A lower growth in
both transferable deposits (saving and current
31.5%
in FY 2016/17
deposits) and other deposits (fixed and foreign
currency deposits) also contributed to slowdown
Table :3.6.1: Monetary Aggregates

Nu. in million Growth (y-o-y)
Items 2015/16 2016/17 2017/18 2015/16 2016/17 2017/18
I. Reserve Money 27,802.92 34,327.86 33,469.76 5.92 23.47 -2.50
II. Broad Money (M2) 79,162.74 104,113.59 114,973.69 15.83 31.52 10.43
III. Components of M2
1. Currency Outside Banks 6,101.73 8,787.66 9,234.04 2.62 44.02 5.08
2. Transferable Deposits 38,831.90 51,935.62 57,061.00 8.68 33.74 9.87
3. Time Deposits 32,640.45 41,285.46 46,163.85 28.27 26.49 11.82
4. Foreign Currency Deposits 1,588.65 2,104.85 2,514.79 29.97 32.49 19.48
IV. Sources of M2
1. Foreign Assets (Net) 67,815.59 68,186.68 66,006.28 16.42 0.55 -3.20
2. Claims on Government -5,570.48 2,852.93 5,029.42 -28.03 151.22 76.29
3. Claims on Other Public Sector 6,106.02 7,046.82 8,306.02 -14.89 15.41 17.87
4. Claims on Private Sector 65,157.15 75,185.09 86,985.09 14.67 15.39 15.69
V. Money Multiplier 2.85 3.03 3.44
Note: The data for monetary aggregates include commercial banks.
in aggregate deposits although, there has been from the financial sector to finance Government
little easing in the deposit rates. In addition, lower short-term cash deficit through Treasury Bills has
deposit mobilization by the banks also resulted also contributed to the growth in domestic credit.
into slowdown in domestic credit growth.
Money multiplier stood at 3.4 in the FY 2017/18,
In terms of sources of money supply, NFA which affected mainly by excess reserve-deposit ratio.
was the main driver of liquidity condition in the The currency-deposit ratio and reserve-deposit
banking system has been declining over the years. ratio remained stable over the years. On the other
The decline in NFA growth contributed to lower hand, the velocity of money remained constant
growth in money supply. The domestic credit at 1.5 percent, indicating stability in the financial
grew by 17.9 percent in the FY 2017/18, mainly system.
contributed by credit to private sector (15.7 %).
The Government borrowings

Chart 3.6.2 : Credit deployment by FIs

100 25
80 20
Growth in percent
Nu. in billion
60 15
40 10
20 5
0 0
Credit to commercial sector Growth (Y-o-Y) RHS
Credit Market Total credit
Nu. 108.81
Development in credit is generally influenced by
liquidity in the banking sector, quality of assets,
cost of fund and economic conditions. With
nascent stage of capital market development and billion (as of June 2018).
continued reliance on credit from the banking
…with nascent capital market
sector, the domestic credit market has been on
development and excess liquidity
an expansionary mode in the recent years. As of conditions, the banking sector influenced
June 2018, the total credit outstanding of the the domestic credit market.
Chart 3.6.3 Loan to commercial sector

2015/16
25 2016/17
2017/18
20
Nu. in billion
15
10
0
Agriculture
Service &
tourism
Manufacturing
Building &
construction
Trade &
commerce
Transport
Personal
loans
Others

Chart 3.6.4: Sectoral non-performing loan
25
Dec 2017
Jun 2018
20
15
% share
10
0
Agriculture
Manufacturing
Service &
Housing
Transport
Others
tourism
Trade &
Personal loan
commerce
financial institutions recorded a growth of 13.3 agriculture increased by 11.1 percent in June
percent, increasing to Nu. 108.81 billion. It is 2018, while in terms of share to GDP, it remained
largely contributed by higher growth in transport constant at 5.2 percent. Meanwhile, the personal
(27.2%), services (25.9%) and housing sector loans which was generally considered high quality
(18.5%). assets recorded a negative growth of 6.1 percent
in the FY 2017/18.
Of the total credit, bank financed 82.1 percent
amounting to Nu. 89.50 billion, and remaining In terms of asset quality, the Non-Performing
17.9 percent (Nu. 19.32 billion) were financed by Loans (NPL) of FIs increased to Nu.12.54 billion in
the non-banks. June 2018, resulting into a marginal deterioration
of assets quality from 11.4 percent to 11.5
Credit to housing, which accounts for 23.6 percent percent.
of total credit, rose by 17.1 percent on account of
higher demand for construction and real estates. Most of the sectors experienced decline in the
On the other hand, flow of credit to tourism and NPL, except manufacturing, housing and transport
services (23.2%) and manufacturing sector (12.3%) sectors. In terms of share, the highest NPL is
declined significantly due to high exposure. While, recorded in trade and commerce (21.3%) followed
the growth in transport loan increased from 10.3 by services and tourism (19.2%) and housing
percent to 15.5 percent in the FY 2017/18. (17.9%) sectors.
The credit profile for trade and commerce, which However, the trend in asset quality is still
accounts 14 percent of total credit revived after a manageable since the loans recovery generally
significant decline in June 2017. begins from the third quarter of the year and the
NPL normally stabilizes towards end of the year.
With the implementation of the PSL, credit to

Box: 3.1 Assessment on Credit to GDP gap
C
redit plays an important role in
economic growth, particularly in 180 Private sector credit and
nominal GDP trend
a bank–based financial system. 162
Given the shallow capital market 144
in Bhutan, the economy has been 126
relying largely on credit from banks and
Nu. in billion
108 Credit to Pvt. sector by FIs
non-banks to finance domestic investment. 90 Nominal GDP
72
In Bhutan, the banking sector credit alone
54
constituted around 64 percent of credit to
36
GDP, concentrating mainly in construction
and service sectors. Almost 90 percent of 18
credit were allocated to the private sector. 0
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Bhutan’s credit growth reflects high
volatility, largely determined by capital possible reasons for expansion of credit,
inflows. Over the year, credit to commercial which resulted into higher credit gap in
sector grew on an average by 22.2 percent, 2012. Although, the financial sector were
while the nominal gross domestic product well capitalized and resilient to potential
(GDP) grew only by 14.1 percent on vulnerabilities, the risk of spillover to the
average, indicating high macroeconomic real sector was imminent, causing external
vulnerabilities. Moreover, the productivity imbalance.
of credit expansion has been deteriorating
due to increasing allocation of credit in With measures put in place in 2012, the
consumption and import led sectors, leading credit gap continued to fall and remained
to unevenly distribution of credit and rising below the threshold. Based on current
bad assets in these sectors. empirical result, the credit gap has been
rising steadily, but remains within the
The prolonged excessive credit growth and threshold level. However, it is important
high leverage in these sectors would not to keep vigilance over credit growth and
only pose a systematic risk to financial leverage expansion because it is not
stability but also causes macroeconomic sustainable in the long run, given the
imbalances. The data shows strong persistent high current account deficit along
correlation between credit and nominal GDP with low domestic investment, low saving,
trend. The credit to GDP gap was used as an high external debt and limited policy buffers.
indicator to examine excess growth to signal
build-up of systematic vulnerabilities in the
banking sector. It is used as a benchmark
buffer guide for countercyclical capital
Credit to GDP gap 60
buffer as recommended by the Basel III 50
guidelines. 40
30
Percentage points (gap)
Ratio
1.0 20
An analysis from credit gap showed two .08 10
episodes of credit boom in Bhutan, with .06 00
one in 1998 and another in 2012. The gap .04
.02
generally refers to the deviation of credit-
.00
to GDP ratio from long term trend, which is -.02
computed by using an HP (lamda =100) filter. -.04
Compared to 1998, the credit gap was severe
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
during 2012 recorded at 7.9 percentage

points which exceeded the threshold limit Credit to GDP ratio (RHS)
of 2.5 percentage as recommended by Trend (RHS)
Gap
the Basel III guidelines. The absence of
macro prudential policy measures and
entry of two new commercial banks were

Box: 3.2 Medium-term Macroeconomic Outlook
C
onsidering the improving With additional tax measures, the domestic
performance of emerging revenue is expected to increase by around
economies, particularly India, 27.6 percent in FY 2019/20. At the same
and its structural and economic time, the outlay is expected to increase
reforms to support growth, the to 30.2 percent of GDP, due to increases
macroeconomic condition in Bhutan looks in current expenditure driven by pay
favourable in the medium-term. and allowances for civil servants and
resumption of infrastructure development
According to the MFCTC1 estimates, expenditure, resulting in higher fiscal
economic growth is projected to average deficit in FY 2019/20.
6.5 percent over the medium-term, driven
by construction and service sectors. The FY 2018/19
construction of new hydro power plants,
Real GDP growth Inflation
broadening of revenue base through tax
is projected at manageable at
rationalization and rescheduling of loan
6.1% 5%
disbursement of Puna I and II are the main
underlying assumptions for the revision
of higher growth prospects. Subsequently,
growth is expected to further accelerate
at 6.8 percent in FY 2019-20, largely due Fiscal deficit Current account
to coming on stream of two hydro power expected to deficit projected
projects. remain below to improve to
As estimated, the headline inflation is

projected to increase to 5 percent in FY
2018/19 and moderate to 4.8 percent in FY
1%
of GDP
18.5%
percent of GDP
2019/20. The output gap, lagged inflation
and Indian inflation are three explanatory Money supply
variables deployed to determine the expected to grow
forecast using regression analysis. by
Inflation persistences and higher output
gap resulted into upward revision of
inflation. In the medium-term, headline
inflation is likely to face up-ward risks
14.8%
largely with expected revision in civil
servants salary by the new government. On the external front, the current account
The inflation forecast also remains broadly deficit is projected to remain at 18.5
in line with that of India, given the pegged percent of GDP, with further improvement
exchange rate arrangement. Further, the to 12.8 percent of GDP in FY 2019/20. The
inflation is also likely to face up-ward risk lower current account deficit projection
from potential upsurge in the global oil is based on rescheduling of hydro power
prices. loan disbursement and tapering of some
major import-led hydropower project
Optimistically, the overall fiscal deficit is construction. At the same time, the trade
projected to remain below 1 percent of deficit is also expected to narrow over the
GDP in FY 2018/19, before it increases to 2.6 medium-term, owing to decline in imports.
percent of GDP in FY 2019/20. The projected
lower deficit in FY 2018/19 is mainly due to As a result, international reserves is
absence of additional capital investment (5 anticipated to adequately cover more
% of GDP) during the interim government. than 13 months of imports of goods and
1
These projections are based on the multi-sector Macroeconomic Framework Coordination Technical
Committee’s (MFCTC) update for Q3 2018 and are subject to change in the next round of revisions. The
policy arm of the Committee is chaired by the Secretary of the Ministry of Finance

services. With surplus liquidity in the banking

system, private credit is expected to
For the most of the time, trade and increase by 18.4 percent in FY 2018/19,
current account deficits are expected to subsequently contributed by easy access
be financed by net capital and financial to finance. At a later phase, the credit is
inflows in the form of hydro power grants expected to moderate at 15.5 percent in
and loan, and other Government loan FY 2019/20. With effort to modernize the
disbursements. With improvement in payment system and digitization, the
trade balance and positive capital and currency in circulation is expected to
financial inflows, Bhutan’s international decline in the medium-term.
reserves position is projected to increase
from USD 1,110.91 million in FY 2017/18 to Risks to the outlook are skewed to the
USD 1,330.25 million in FY 2018/19 before downside, but active policies could lead
increasing to USD 1,566.18 million in FY to higher growth outcomes. The delay in
2019/20. implementing the Goods and Services
Tax (GST) and commission of hydro power
Monetary and credit growth is expected to projects could lead to larger fiscal deficits.
remain in tandem with economic growth The gradual fiscal consolidation coupled
outlook. Money supply is expected to grow with higher domestic revenue mobilization
around 14.8 percent in the medium-term and efforts to channelise credit to
mainly driven by growth in domestic credit. productive sector could further help to lift
In absence of monetary policy operation growth. Special attention also needs to
framework, an increase of capital inflows be put on external risks, stemming from
particularly from the hydro power inflows is Indian growth and new economic reforms,
expected to further build-up liquidity in the inflation and global oil prices to prevent
banking system. potential spillover impact on the domestic
economy.
Medium-Term Macroeconomic Outlook Indicators

2017/18 2018/19 2019/20
Actual Projection
Real Sector ( % change)
Real GDP at market prices(*) 4.63 6.11 6.83
Consumer Price 2.55 5.00 4.75
General Government (in % of GDP)
Total revenue and grants 31.32 19.55 27.57
o.w Tax revenue 15.00 12.78 12.01
Total expenditure 33.58 20.43 30.81
o.w Capital 17.19 5.50 12.19
Fiscal balance (1.01) (0.72) (2.62)
External Sector (in % of GDP)
Current account balance (19.02) (18.49) (12.76)
o.w Trade balance (16.38) (12.17) (7.41)
External debt 110.00 102.23 99.96
Monetary Sector ( % change)
Money Supply 10.43 14.83 13.85
o.w Credit to Private Sector 15.69 18.44 15.50
* Figure for Real GDP should read as calendar year (2017)

Source: Multi-sector Macroeconomic Framework Coordination Technical Committee’s (MFCTC) update for
Q3 2018.

4
Monetary Policy
Operations

4. Monetary Policy Operations
T
he RMA’s monetary policy operation rate arrangement, the RMA also has an important
framework implicitly aims to achieve role in monetary and credit management by
price stability. The intermediate target resorting to the reserve requirements and
for achieving price stability in Bhutan prudential measures.
is to maintain the one-to-one peg
exchange arrangement between Indian Rupee and Currently, the RMA conducts monetary policy
Ngultrum. through the Cash Reserve Ratio (CRR) and interest
rate policy to influence credit and monetary
Targeting the exchange rate, however, implies the aggregates. The RMA also relies on sweeping
acceptance of India’s monetary policy. In other arrangement to manage volatility of liquidity
words, an independent monetary policy in Bhutan conditions in the money market and commercial
is more or less, precluded. As a consequence, bank’s balance sheet.
monetary policy is confined to support the peg,
fulfilling the following basic conditions: Over the years, the liquidity sterilized from the
commercial banks through the CRR and sweeping
a) Readily making available sufficient Indian has increased gradually with the increase in
Rupee on demand for exchange with deposits of commercial banks. While, a part of
the Ngultrum for payments in India and excess liquidity is absorbed by the CRR, there still
provisioning 100 percent reserve backing for remains a substantial amount of excess liquidity in
all Ngultrum issued to ensure sustainability the banking system.
of the exchange rate system.
As an import-dependent economy, with high trade
b) Confidence-building measures for Ngultrum deficit, lending by financial institutions directly
( by making a credible monetary and fiscal translates into imports, putting subsequent
policies). pressure on international reserves requires a
broader framework to manage domestic liquidity.
c) Sterilizing persistent growth in the liquidity
to forestall possible build-up in the
inflationary pressure, weakening of balance Liquidity Conditions in the
of payments, and mitigate the contingent Banking Sector
effect in the financial system.
The development of liquidity in the banking
While ensuring the sustainability of the exchange sector affects growth of money and credit in the
30 Chart 4.1 Liquidity condition in the banking sector
25
Nu. in billion
20
15
10
-0.5
Jun 2016
Aug 2016
Oct 2016
Feb 2017
Apr 2017
Jun 2017
Aug 2017
Oct 2017
Dec 2017
Feb 2018
Apr 2018
Jun 2018
Sweeping account Excess liquidity Cash reserve requirement (CRR)

80 Chart 4.2 Components of liquidity

(Autonomous factors)
60
40
Nu. in billion
20
-20
Jun 2016
Aug 2016
Oct 2016
Feb 2017
Apr 2017
Jun 2017
Aug 2017
Oct 2017
Dec 2017
Feb 2018
Apr 2018
Jun 2018
-40
Sweeping project accounts Net domestic assets Net foreign assets

Net Government accounts Currency in circulation
economy. An effective liquidity management and The liquidity conditions are based on the analysis
forecasting framework is the cornerstone for the of the autonomous factors sourced from the
RMA to fulfill legal mandate to formulate and balance sheet of the Central Bank. This is because
implement monetary policy. the Central Bank is the creator of liquidity in the
banking sector.
Having an effective liquidity management
framework will (i) allow the RMA to effectively Autonomous factors are defined as the items on
signal implement monetary policy transmission the central bank’s balance sheet, either on asset
and (ii) create supportive conditions for the or on the liability side that are not controlled by
development of money markets. the central bank through monetary policy. The
components of autonomous factors in the RMA’s
Table 4.1 Liquidity Position and Liquidity Management Operation (Nu.in billion)
AUTONOMOUS FACTORS 30-Jun-16 30-Jun-17 30-Jun-18

Net foreign assets 59.20 59.56 56.41
Net domestic assets (21.42) (18.57) (20.38)
Currency in circulation (9.67) (11.53) (12.09)
Net Government accounts (1.03) (2.72) (2.08)
Sweeping project accounts 1
(8.95) (5.22) (3.37)
Total net autonomous factors 18.13 21.53 18.49
MONETARY POLICY / LIQUIDITY MANAGEMENT
Cash reserve ratio (CRR) 8.25 10.28 11.04
Liquidity-providing operations 0.00 0.00 0.00
Liquidity-absorbing operations (RMA bills) 0.00 0.00 0.00
Liquidity position after CRR and monetary operations 9.89 11.25 7.46
Excess reserves (current accounts) 9.89 11.25 7.46
Estimated Precautionary Liquidity Buffer 3.00 3.00 3.00
Pure Excess Reserve 6.89 8.25 4.46
Sweeping Accounts are the current account of RGOB, Hydropower Projects, other project accounts maintained
1
with commercial banks that are being swept by the RMA at the end of day. The accounts are swept due to its
unpredictability and volatility.

balance sheet includes (i) Net Foreign Assets amount of Nu. 7.46 billion corresponds to excess
(NFA) (ii) Currency in Circulation (iii) Net Domestic reserves of the banks in their current accounts
Assets (NDA) (iv) Net Government Account and (v) maintained at RMA.
Sweeping Accounts.
Of the total excess reserves, a part of it are
Banking sector has persistent liquidity surplus due required to keep as voluntary Precautionary
to the accumulation of net foreign assets in excess Liquidity Buffer (PLB) by the commercial banks.
of the sum of all liquidity absorbing factors2. The The net balance needs to be absorbed through
growth in NFA has been partly compensated by the RMA liquidity management operations. Based
growth in net domestic liabilities, currency in on an empirical study and survey of the banks, the
circulation and sweeping accounts of the banks. total PLB is currently estimated at around Nu. 3
The net domestic liabilities, net Government billion. Consequently, pure excess reserves (true
account and sweeping accounts reflects huge excess liquidity of banking sector) was estimated
volatility given the nature of fund as compared to at Nu. 4.46 billion as on June 2018.
currency in circulation and NFA.
New Monetary Policy
As on June 2018, the total liquidity surplus
Implementation Framework
was recorded at Nu. 18.49 billion. A part of
the liquidity surplus was absorbed by the RMA
The existing monetary tools are rigid and not
through the CRR (Nu. 11.04 billion). The balance
market driven. The current CRR lacks flexibility
Chart 3.5: Features of the New Monetary Policy Framework
New Monetary policy framework
Open market Standing Cash reserve

operations (OMOs) facilities (SFs) ratio (CRR)
Main liquidity Deposit

management operations facility
Lending
Longer-term liquidity
facility
management operations
Fine-tuning operations
Structural operations
2
Liquidity absorbing factors include Currency in circulation, Net domestic assets,
Net Government account and Sweeping accounts.

in dealing with change in daily change in liquidity Interest Rate Corridor

conditions. Therefore, appropriate monetary
policy tools for managing both frictional as well as Standing facilities are monetary policy instruments
structural liquidity of the banking sector become used by the central bank for short-term liquidity
critically important. management. Standing facilities allow commercial
banks to borrow from the central bank (lending
Against this backdrop, the RMA has developed a facilities) or deposit funds with the central bank
new Monetary Policy Implementation Framework (deposit facilities) at a pre-determined rate of
(MPIF) which is flexible, effective and market interest. It is an automatic mechanism to limit the
based. The main attributes of new MPIF are to volatility in the interbank market rates and keep
them close to the central bank’s policy rate.
(i) Facilitate monetary policy signalling,
(ii) Maintain an optimal level of liquidity in the Although, there is no universal rule for setting the
banking system, IRC. Generally, the developing economies choose
(iii) Allow banks to enhance their treasury a wider band in the beginning while conducting
function, leading to reduced liquidity costs OMO, in view of under developed money market.
and settlement risks and For countries where the financial system is still at
(iv) Support development of the domestic the nascent stage, the IRC is set at higher Basis
money market which will contribute Points (bps) initially to enable the banking sector to
towards achieving macroeconomic adjust to the changing liquidity conditions.
stability.
As the country gains more experience in liquidity
The new monetary policy framework is expected management and forecasting capacity, the IRC is
to allow the RMA to manage overall liquidity narrowed down in order to stabilize the inter-bank
conditions effectively through a broad range of borrowing rates. Moreover, it will allow effective
market-based instruments. The monetary policy liquidity management in the banking sector.
operations are conducted through Open Market
Operation (OMO). In the OMO, the securities
are purchased and sold in the open market by
the Central Bank. In context of Bhutan,
the OMO will be conducted in the form of Chart 6.6: Interest Rate Corridor
collection of fixed-term deposits*, issuance
of collateralized loans, as well as overnight
standing facilities (marginal lending and
Marginal
deposit facilities) which will be guided by the X+Y (margin)
bps lending facility
Interest Rate Corridor (IRC) set by the RMA.
Interbank
While instituting monetary policy operation, Policy Rate (X)
Market Rate
it is important to determine the key policy
rate based on inflation dynamics of the X-Y (margin) Deposit Facility
bps
domestic economy. By setting the key
policy rate and reserve requirement, the
central bank aims to influence the gamut of
domestic interest rate, which in turn affects
the level of economic activity and inflation.
(*) Absorbing liquidity from the Banks for a specific period and rate that will be determined by the RMA

Box: 4.1 Modelling Inflation in Bhutan
G
lobal experience over the past decade shows that the inflation dynamics are
undergoing significant changes – there are evidences of flattening of Phillips curve
(i.e. inflation is turning out to be less responsive to output gap1 ). This makes inflation
forecasting difficult and challenging. An augmented Philips Curve approach was
deployed for modelling inflation in Bhutan using data from 1999 to 2018.
The Phillips Curve framework postulates that inflation rate in the short run (over the course
of the business cycle) is determined by three main factors - (i) the level of economic activity
in relation to its potential (which can be proxied by estimates of the output gap) (ii) expected
inflation and (iii) supply shocks. Cross-country experience suggests that inflation expectations
are largely adaptive in nature (i.e. past inflation trends have a large influence on inflation
expectations), and this phenomenon is relevant for emerging and developing countries
including Bhutan. Thus, inflation in Bhutan can be considered as backward-looking. India being
the major trading partner of Bhutan with more than half of Bhutan’s inflation being imported,
inflation trends in India ( Indian wholesale price inflation in manufactured products are
included in the model to capture the supply shock.
Inft_t=β1 Inft _1+β2gapt _1+β3 ind_inft
Where;
Inft = CPI Inflation in Bhutan
gap = output gap in Bhutan
ind_inf = wholesale price index inflation (manufactured products) in India.
Inf_t= 0.67 inft-1+ 0.21 Ygapt-1+ 0.44 ind_inft

(9.28***) (2.21***) (4.47***)
Figures in parentheses are t-statistics and **** indicate the significance at 1% ** at 5% and * at
10 %. Sample period for the estimation is 1999-2017.
R-square=0.96
Root Mean Squre Error (MSE)=1.28
Durbin-Watson d-statistic = 2.28
The model has a good explanatory power and all the variables are statistically significant. The
regression results suggest that inflation in Bhutan is highly inertial with a coefficient of 0.67
on lagged inflation. Output gap (an indicator for excess demand pressures in the economy) is
statically significant and positive. The point estimate suggests that an increase of one percent
change in output gap could increase inflation by 0.21 percent with a lag of one year.
This highlights the role of demand conditions on inflationary developments in Bhutan and
signifies the critical role of monetary policy in managing the domestic demand and inflation.
The role of imported inflation from India is confirmed by the regression estimates. The estimates
indicate that a one percentage point in Indian inflation (measured by wholesale manufactured
products inflation) pushes up inflation in Bhutan by 0.44 percent. Thus, higher inflation in
India contributes to inflationary pressures in Bhutan and ebbing of inflation in India eases
inflationary pressure in Bhutan.
1
The output gap is measured by the deviation of actual output from its potential level, expressed as a
percentage of potential output. The measurement of potential output level is quite challenging and data
intensive, especially for developing countries like Bhutan given the rapid structural transformation. A simple
and common approach, Hodrick-Prescott (HP) filter is used to estimate potential output and output gap.

Box: 4.2 Determining Key Policy Rates
A
central element of the Monetary Policy is the Key Policy Rate. The Key Policy Rate is the
rate at which the central bank signal its monetary policy stance based on inflation,
output and broader macroeconomic considerations. For illustrative purpose, the RMA
used Taylor Rule to determine the key policy rate in Bhutan. The Taylor Rule is a simple
monetary policy rule that suggests how a central bank could adjust its interest rate
policy instrument in a systematic manner in response to developments in inflation and output.
Thus, it provides guidance to the Central Bank in determining interest rate policy.
According to the Taylor Rule, the nominal interest rate should respond to deviation of the actual
inflation rate from its target and size of the output gap. In the original version of the Taylor Rule,
the coefficient on inflation gap and output gap was estimated at 1.5 and 0.5, respectively [R1]
it*=r*+π*+1.5 (π_t-π* )+0.5(y_gapt) ----------------------- R1
There are two common modifications of Taylor’s original rule for policy inputs. The first is
to introduce inertia in the rule proposed by Taylor (1993) with a weight of 0.85 on the lagged
interest rate [R2]. The second (Taylor 1999) suggested a coefficient on real output twice as high as
compared to the Taylor (1993) to give a balanced weights to inflation and output deviations [R3]
it=0.85 (it-1) )+(1-0.85) [(r*+π^*+1.5 (π-t-π^*)+0.5(y_gapt)] --- R2

it=0.85 (it-1) )+(1-0.85) [(r*+π^*+1.5 (π-t-π^*)+1.0(ygapt)] ------- R3
For Bhutan, using the three alternative Taylor Rules discussed above, the assumptions on the
neutral real interest rate and the inflation target, and forecasts of inflation from the Phillips curve
framework, the illustrative range of interest rates estimated from the various rules are set out in
the table below.
Year Output CPI Inflation Natural Inflation Policy Rate

Gap Inflation Gap 1 Real Rate2 Target
Rule I Rule 2 Rule 3
2017 -1.26 4.74 -0.26 1.50 5.00 5.48 5.90 5.03
2018 -1.05 4.73 -0.27 1.50 5.00 5.46 5.81 5.03
2019 2.44 5.46 0.71 1.50 4.75 6.78 6.01 5.98
1
The inflation gap is the difference between current year’s inflation projection and the central bank’s target.
Since the RMA does not have any explicit inflation target, it is assumed that RMA has an interim inflation target
of 5% in 2018 and 4.75% in 2019.
2
Neutral real interest rate is the level of real interest rate when the economy is growing at its potential rate
and inflation is at its target. Since no estimates on real neutral interest rate are available for Bhutan, we
assumed that Bhutan’s neutral interest rate is close to that of India.

Box: 4.3 Interest Rates
P
rior to 1999, the interest rates were directly set by the RMA. With the rapid financial sector
development and continued dependency for investment finance from the banking sector,
the interest rate in Bhutan was deregulated in April 1999, allowing the banks to determine
deposit and lending rates by the market forces.
To strengthen monetary policy operation, RMA introduced and implemented the base rate
system in September 2012. It is a minimum rate below which it is not viable for the financial
institutions to lend. It also served as the reference benchmark for floating rate loan products,
apart from other external market-based benchmark rates.
A review for the Base Rate system was conducted in early 2016, since it revealed some rigidities
in the banking system. To address the rigidities, a new forward looking and integrated interest
rate policy known as the Minimum Lending Rate (MLR) was introduced and implemented with
effect from August 1, 2016. The main objective of the MLR was to encourage competition and
develop professionalism among the Financial Institutions to result in a balanced approach for
financial intermediation.
Minimum Lending Rate (MLR)

The MLR is computed adding up the three cost parameters:
i. Marginal Cost calculated based on interest rates times the weight. The weight
is derived as the percentage of total fund.
ii. Negative Carry Charges on CRR: The cost that the banks incur while
maintaining 10% reserve with the RMA (Required CRR * (Marginal Cost/
1-Required CRR)
iii. Operating Cost: Is arrived by dividing the operating cost by the total
deposits of the bank.
On the single MLR, each financial institution are free to add its expected spread to arrive at the
median final lending rate. Financial institutions compute their product-specific final lending
rates by adding the following components to the MLR: Credit risk and tenor premium, and an
item covering the bank’s business strategy cost.
Financial institutions cannot lend below the MLR except for selected loans such as:
a. Advances to depositors against their own deposits;

b. Loans for liquidity management of a maturity of less than 90 days;
c. Consortium loans approved by the Royal Government for Bhutan for
investment in strategic sectors that are of national interest;
d. Strategic/priority sectors as defined from time to time by the RMA; and
e. Staff Incentive Loans.
As of June 2018, the Single MLR is computed at 6.3 percent, a decrease by 0.2 percentage
points from 6.5 percent as of June 2016. The table below illustrates the computation of MLR.

Components of MLR (%)
Marginal Cost CRR Cost Operational Cost MLR

Bank 17- 17- 18- 17- 17- 18- 17- 17- 18- 17- 17- 18-
Jun Dec Jun Jun Dec Jun Jun Dec Jun Jun Dec Jun
BOBL 3.46 3.78 3.62 0.38 0.42 0.40 0.88 0.83 0.74 4.72 5.04 4.76
BNBL 4.87 4.69 4.40 0.54 0.52 0.49 0.91 0.88 1.152 6.32 6.08 6.04
DPNBL 4.4 4.83 4.89 0.49 0.54 0.54 1.66 0.91 0.70 6.55 6.28 6.13
T-Bank 4.73 4.94 5.29 0.53 0.55 0.59 1.18 0.82 0.70 6.44 6.31 6.58
BDBL 6.97 6.77 6.26 0.77 0.75 0.70 0.76 1.37 1.00 8.50 8.89 7.96
Average 4.89 5.00 4.89 0.54 0.56 0.54 1.08 0.96 0.86 6.51 6.52 6.30
The decrease in MLR was mainly contributed by fall in operational cost to 0.9 percent
in June 2018 from 1.1 percent in June 2017. Wages and salaries continue to be a major
component of bank’s operating cost. Marginal cost and CRR cost remain constant at
4.8 percent and 0.5 percent respectively. The marginal cost which accounted 77.6
percent of total MLR, attributing to the cost on fixed deposits. Among the banks,
the BoBL has lowest marginal cost due to high current account deposits, mainly
contributed by the corporate and government deposits. While, CRR cost remained
constant over the period without revison on the CRR rate.
Implementation of the MLR has helped in moderation of the overall interest rate
structure and in bringing some level of competition in product pricing among banks.
However, the impact of this moderation is only felt by certain loan sectors such as
housing and construction, and consumption oriented loans. The BoBL, a dominant
bank continues to have a comparative advantage over smaller banks while pricing of
loans and limiting level playing field in determination of interest rate in the market.
Deposit Rates
The saving rates for all banks ranged at 5.0-6.0 percent as of June 2018. The lower
bound on the interest rate range for various time deposits with maturity up to 3 years
have marginally decreased in 2018. While the upper bound also decreased slightly by
200 basis points from 10 percent in June 2017.
Meanwhile, lower bound of interest rates for deposits with a maturity more than 3
years slightly declined by 25 basis points and the upper range has increased by 75
basis points in June 2018. On an average from June 2017 to June 2018, the deposit
rates of commercial banks declined from 7.1 percent to 6 percent, reflecting a fall in
the overall deposit rates of the banks.

Deposit Rates of Commercial Banks
As of June end ( Percent )
Type of Deposits 2013 2014 2015 2016 2017 2018
Savings 5.00-5.50 5.00-6.00 5.00-6.00 5.00-6.00 5.00-6.00 5.00-5.75
Term Deposits
a) 3 months to less than 1 year 5.00-6.50 5.00-7.00 4.00-7.00 4.00-6.50 3.00-7.00 2.00-6.00
b) 1 year to less than 2 years 7.00-7.50 7.00-7.50 6.75-7.50 6.00-7.00 6.50-7.50 6.50-7.00
c) 2 years to less than 3 years 7.50-7.75 7.50-7.75 7.00-8.00 7.00-7.50 7.00-8.00 4.00-7.50
d) More than 3 years 8.00-8.75 8.00-10.00 8.00-10.00 8.00-9.25 7.75-10.00 7.00-8.00
Source: Commercial Banks
Lending Rates
On the lending front, average lending rates of commercial banks across all the sectors increased
during the review year. The major sector such as housing marginally increased on average from
10.6 percent to 10.9 percent as of June 2018, while service sector also witnessed an increase
from 10 percent to 10.5 percent in June 2018. The personal and transport sectors also recorded
a marginal increase in the lending rates. On average, the overall lending rate of the banks
increased from 10.9 percent in 2017 to 11.5 percent in 2018.
Selected Lending Rates in Bhutan

As of June end ( Percent )
Loans by Purpose 2014 2015 2016 2017 2018
1. General Trade 13.00-14.15 13.75-16.00 13.00-14.00 10.50-13.00 9.86-13.00
2. Manufacturing Industry 11.73-16.00 13.00-16.00 11.73-13.00 9.98-12.50 10.00-13.00
3. Service Industries 11.73-16.00 13.00-15.15 11.73-14.00 8.00-12.00 8.49-12.53
4. Transport 11.73-14.10 12.15-16.00 11.73-14.00 8.92-12.50 9.07-12.50
5. Agriculture & Livestock 11.73-13.00 12.00-13.00 11.73-13.00 7.99-11.00 8.49-11.00
6. Housing 12.73-16.00 13.00-15.25 12.48-14.00 8.20-13.00 8.46-13.25
7. Personal Loan 13.00-16.00 15.00-16.00 15.00 8.85-14.00 9.64-15.00
Source: Commercial Banks

Box: 4.4 Collateral Framework

In an effort to create supportive environment for the development of capital market, the RMA
has developed a collateral framework as part of the new Monetary Policy Implementation
Framework (MPIF). The collateral framework will allow the RMA to effectively provide liquidity
to banks. The collateral framework has clear set of rules defining list of eligible securities
registered with the Royal Securities Exchange of Bhutan (RSEBL).
The collateral framework also defines risk control measures based on issuer. With the
implementation of the monetary policy by the RMA, the banks can avail liquidity from the
RMA by pledging the eligible Securities. The RMA has identified three categories of debt
instrument based on issuers and credit risk.
1. Debt instrument issued by the Government

2. Debt instrument issued by the State-owned Companies and
3. Debt instrument issued by the Private Sector.
Rate and amount of 91 days T-Bills

7.0 3.5
6.0 3.0
Nu. in billion
5.0 2.5
In percent
4.0 2.0
3.0 1.5
2.0 1.0
1.0 0.5
0 0.0
3Jan, 18 3Feb, 18 3Mar, 18 3Apr, 18 3May, 18 3June, 18 3Jul, 18 3Aug, 18 3Sep, 18 3Oct, 18 3Nov, 18
Bids accepted (Nu. billion) Discount rate -RHS (%)
During the year, T-bills rates remained on an average of 2.52 percent compared to around
1.57 percent in the previous year. The T-bills rates have been determined depending on the
liquidity in the banking system. In the month of November 2018, T-Bill (R302) amounting
Nu.4.5 billion were issued at the weighted average rate of 1.67 percent for the maturity
period of sixty-four days. The T-Bill was issued solely by RGoB to meet the day to day cash
requirement.
Mostly, it is the banks who are active in purchasing the T-bills as they have surplus short
term liquidity. It also shows that in the absence of short term investment avenues, banks
have been investing in T-bills.

Box: 4.5 Workshop on the Modernization of Monetary Policy
Frameworks
The RMA in collaboration with the International Monetary Fund (IMF) and the IMF’s South Asia
Regional Training and Technical Assistance Center (IMF-SARTTAC), organized a high-level
workshop to engage policymakers on issues related to the modernization of Monetary Policy
Frameworks of Bhutan, India, and Nepal from September 10-11, 2018 at Paro, Bhutan.
The Workshop provided opportunity to discuss the modernization of India’s Monetary Policy
Framework of inflation targeting and the implication for Bhutan and Nepal, given the pegged
exchange arrangement with Indian Rupee. In addition to inflation spillovers to Bhutan and
Nepal, the discussions also touched on the setting of policy rates in Nepal and Bhutan and
the impact of capital account liberalization in India on Bhutan and Nepal. The Workshop also
discussed options to strengthen analytical capacity, including monetary transmission and
common challenge faced by central banks in emerging market economies.
The Workshop was attended by high-level officials from the Nepal Rastra Bank, Reserve Bank
of India and staff from the IMF and IMF SARTTAC. Participants from Bhutan included Members
of the RMA Board, two Honorable Members of the National Council and senior officials from the
RMA, MoF, GNHC, RIGSS and BCCI.
The Governor Dasho Penjore delivered the Opening Remarks during the Workshop held in Paro.

5
Financial Sector
Development

Financial Sector Development
T
he financial system plays a critical role of financial system and to support sustainable
in the economy. It enables the financial economic growth and employment creation.
intermediation process which facilitates
the flow of funds between savers and
Financial Sector Review
borrowers, thus ensuring that financial
resources are allocated efficiently towards The financial sector of Bhutan consists of five
promoting economic growth and development. commercial banks and three non-banks (two
Financial stability describes the condition where insurance companies and one pension fund).
the financial intermediation process functions The existing level of liquidity and capital in the
smoothly and there is confidence in the operation financial sector indicated a favorable position.
Box: 5.1 ROYAL MONETARY AUTHORITY ACT OF 2010
T
he RMA Act 2010 empowers the RMA Section 8, RMA Act 2010 aims to promote
with explicit, statutory mandate to sound practices and good governance in the
protect and enhance financial stability financial services industry to protect it against
in Bhutan. This mandate includes efforts to systemic risk; and subject to the above,
prevent a systemic event and, should a crisis promotes macro-economic stability and
occur, assistance with restoring financial economic growth in Bhutan.
stability in the country.
Macroprudential Micro
Macroeconomic Policy prudential
Policies Policy
Individual
Financial Stability
Price Institutional
& Systemic Risk
Stability Risks
of key financial institutions and markets within the Further, the strengthening of the regulatory and
economy. supervisory framework and the risk management
measures enabled the financial sector to remain
When financial stability risks are managed resilient to external shocks.
well, systemic financial crises are less likely to
occur, and can easily manage and mitigate the Over the recent years, asset growth of financial
spill-over effects during the crisis. The RMA’s sector has averaged almost 10.5 percent, rising
prudential supervision of the financial institutions from Nu. 107.47 billion in June 2015 to Nu.
contributes towards an efficient functioning 161.15 billion in June 2018. The growth in asset

Financial Sector
Development
Chart 5.1: Loans and advances from the financial system 109
100 95
89.49
87
76.72
80 72 71.44
63
61.34
Nu in billion
60 55.27
40
18 19
20 15
10
8
0 2013/14 2014/15 2015/16 2016/17 2017/18
Bank loans & advances Non-Banks loans & advances Total FIs loans & advances
was largely driven by the loans and advances. Of 49.5 percent, followed by bonds and borrowing at
the total asset, banks’ comprise of 86.3 percent 16.8 percent.
and the remaining 13.7 percent by non-banks.
The total credit of the financial sector stood at The overall capital funds position of the banking
Nu.108.81 billion as of June 2018 as compared to sector improved at Nu.17 billion as of June 2018,
Nu.95.06 billion in June 2017. Correspondingly, an increase of 6 percent, enlarging the buffer
the domestic credit to GDP ratio, increased to 65.2 available for absorbing risk. Further, both banking
percent in June 2018 from 64.2 percent in June and the non-banking sector saw an increase in the
2017 indicating expansion in the domestic credit. risk-weighted assets (RWA) of 11.8 percent and
8.4 percent respectively.
The total liabilities of the financial sector
increased to Nu. 161.15 billion in June 2018. Of Despite an increase in the capital fund, higher
this, the banking sector deposits accounted 70.4 increase in RWA has resulted in lowering the Risk
percent, followed by reserves and capital with Weighted Capital Adequacy Ratio (RWCA) and
13.5 percent. Core Capital Ratio (CCR) for both banks and non-
banks. Nevertheless, the ratios remained above
The major component of liability in the non- the minimum regulatory requirement of 12.5
banking sector was the insurance fund, comprising percent.
Table 5.1 Liabilities of Financial Sector (Nu. In billion)

Liabilities June-17 June-18
Paid up capital 8.95 9.07
Reserve Deposit 11.72 12.62
Deposit Liabilities 104.59 113.48
Bonds & borrowings 6.73 4.66
Interest provisions 3.22 3.65
Insurance Fund 8.26 10.96
Other liabilities 5.52 6.71
TOTAL 149.00 161.15

Deposits Composition
33.6%
Corporate deposits
16.4%
RWCAR ratio for banks
(Fell by 1.3%).
66.4% 15.1%
RWCAR ratio for non-banks
Retail deposits
(Fell by 2.3%)
The fall in corporate deposits Both the ratios remained above the
has decreased liquidity of minimum regulatory requirement
banks due to its seasonal and of 12.5% (including the capital
unpredictable nature. conservation buffer of 2.5%).
Chart 5.2 Capital adequacy for banks

120 25
107.25
20% 97.47
100 94.44 95.4
20
17.5% 17.9%
17.2%
16.4%
80
Nu in billion
75.12
In percent
14.1% 14.1%
15.2% 13.4%
13.2%
15
60
10
40
16.53 17.49 16.54 17.59 5

20 15.01
11.42 12.65 13.79 13.61 14.14
0 2013/14 2014/15 2015/16 2016/17 2017/18

0
Capital fund Total risk weighted Asset Tier I

RWCAR (12.5%) Core CAR (7.5%)
Profitability of both banks and non-banks have billion with an excess liquidity of Nu.13.39 billion
improved, generating a combined net profit to meet the payment obligations.
of Nu.802.72 million in June 2018. While the
profitability indicators have improved, the Return SLR position for non-banks also remained well
on Assets (0.5 %) and Return on Equity (3.9%) above the minimum statutory requirement of
remained below satisfactory level. 10 percent of the total liabilities. The position
improved by 2.7 percent mainly due to the
Banks liquidity position (SLR) stood at 31 increase in quick assets of non-banks by Nu.
percent, which is above the minimum statutory 663.39 million. The quick assets amounted to
requirement of 20 percent of the total liabilities. Nu. 2.4 billion against the minimum requirement
The quick assets amounted to Nu. 37.66 billion of Nu. 1.86 billion with an excess liquidity of
against the minimum requirement of Nu. 24.27 Nu.573.44 million .

Financial Sector
Development
Chart 5.3 Capital adequacy for Non-banks

30 20
17.4%
25.14
25 15.72%
23.33
14% 21.52 15.1% 15

20
Nu in billion
14.2%
18.52
13.2%
17.40
12%
In percent
11.9%
11.3%
15 9.9% 10
10
5
50 3.27
3.74 3.06 3.52
2.43 2.91 2.48 2.78
1.97 2.19
0 2013/14 2014/15 2015/16 2016/17 2017/18

0
Capital fund Total risk weighted asset Tier I
RWCAR (12.5%) Core CAR (7.5%)
Credit Market a sign of deterioration with increase in Non-

Performing Loan (NPL) from Nu. 10.80 billion in
Loans and advances of the financial sector June 2017 to Nu. 12.54 billion in June 2018. The
increased by Nu. 13.75 billion during the review sector with the highest NPL during the period
period. As in the past, the loans were highly under review is trade & commerce with 21.3
exposed to housing, service & tourism and trade percent, followed by service & tourism with 19.3
& commerce sectors. The sector-wise analysis percent, housing with 18 percent and production
reveals that out of the total loans of Nu. 108.81 & manufacturing with 15.2 percent. The Gross
billion, housing sector has the highest with NPL ratio increased slightly by 0.2 percent in June
Nu. 25.72 billion (23.6%) followed by service & 2018, indicating less than satisfactory level of
tourism sector with Nu. 25.21 billion (23.2%) and NPL that would require the financial institutions
trade & commerce with Nu.15.02 billion (13.8%). to focus on the credit monitoring and control
procedures to further check on the deterioration
During FY 2017/18, the asset quality has seen of NPL.
Absolute NPL of FIs

Chart 5.4 Total sectoral NPL increased by
11%
12%
Nu.1.74 billion
&
Housing
Service/Tourism
Trade & Com.

13% Prodn. & Manu the Gross NPL ratio
39% Personal stood at
Transport
Agriculture
11.5%
9% Others
5% in June 2018.
6%
5%

Chart 5.5 Market capitalization
2017 29.36
2016 22.75
2015 23.99
2014 22.50
2013 19.93
2012 17.63
2011 14.38
2010 10.01
2009 8.07
2008 7.37
2007 5.03
0 5 10 15 20 25 30
Nu. in billion
Developments in the Capital account in the Central Depository has decreased

to 62,066 from 62,299 in the previous year. The
Market decrease in the number of shareholder’s account
was mainly due to secondary market trading and
During the period under review, a total number of off-market transactions.
4,420,128 shares worth Nu. 125.68 million were
traded in the secondary market as compared to In the bond market segment, the total outstanding
the total traded volume of 11,486,616 shares bonds worth Nu. 11.04 billion against 19 Bonds
worth of Nu. 328.7 million in 2016. listed on the Exchange. Their maturity for
redemption started only from 2018 onwards till
At the end of 2017, the market capitalization of 2025.
21 listed companies increased by 12.45 percent
as compared to the previous year. In absolute The Stock Exchange officially listed the RSA Pvt.
terms, it has increased from Nu. 22.74 billion to Ltd. Bond Series-I at the coupon rate of 9.35
Nu. 25.58 billion, owing to appreciation in the percent with the face value of Nu. 1000 per unit,
market prices of shares of companies namely the worth Nu. 80 million with the maturity date on
RICB, PCAL, DSCL, BIL, DPNB, GBRL, EBCC and TBL. January 25, 2024. The Bond was officially listed on
During the year, the total number of shareholder’s the Exchange on March 9, 2017.
Chart 5.6 Number of shareholders

80,000
70,000
Number of shareholders
62,687 62,991 62,555 62,299 62,066
60,000
48,005 48,077
50,000
40,774
40,000
30,000
17,654
20,000
11,782 12,851
10,000
0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Financial Sector
Development
New Initiatives undertaken during 2018

Current regulatory arrangements in July 2018. The main objective of this regulation
includes:
The RMA has initiated the strengthening of
the existing regulatory framework to make the i Developing, promoting, assisting and
Bhutanese financial system more risk resilient. The supporting the establishment of, expansion or
micro-prudential regulations, which are currently improvement of cottage and small industries
in place, address the safety and soundness of by granting credit facilities,
individual financial institutions. Additionally, in i Transforming the CSI sector into a more
order to mitigate the risks emanating within the enterprising and commercially-oriented sector
financial sector or macro-economic risks that through coordinated interventions and better
could potentially destabilize the entire financial access to finance,
sector, the following policy measures were i Promoting opportunities for youth
undertaken: employment,
i Promoting domestic production and import
i The Prudential Regulations 2002 was issued substitution, and
to implement Micro-Prudential Regulations to i Catalyzing the CSI sector as a driver of
regulate, supervise and monitor the health of Bhutan’s economic transformation.
the financial institutions.
i The Financial Services Act 2010 was enacted (ii) Rules and Regulations
to promulgate sound banking and financial
policies within the economy.
for Licensing of Insurance
i Foreign Exchange Regulations 2013 was Companies:
amended to govern the foreign currency In July 2018, the RMA issued the Rules and
transactions. Regulations for Licensing of Insurance Companies
i The Macro-Prudential Rules and Regulations in Bhutan 2018. The main objective of this
was issued in 2014 to promote financial regulation is to standardize the application process
stability and minimize the systemic risk. for insurance business in Bhutan.
i The Credit Rating Agency Regulation 2014 was
issued for development of credit rating agency iii) Rules and Regulations for
to help financial intermediation activities.
Insurance and Reinsurance
Companies:
Following new rules and
The RMA issued the Rules and Regulations for
regulations were issued Insurance and Reinsurance Companies in Bhutan
during FY 2017/18 2018 which came into effect from of July 1,
2018 superseding the Investment Guidelines for
(I) Rules and Regulations for Insurance Business 2015.However, Regulations
Cottage and Small Industries for establishment of Insurance Companies and
Regulations for the establishment of Reinsurance
(CSI) Banks.
Business in Bhutan shall be legally valid until the
In effort to promote the CSI sector in the country, Authority issues further notice. These Rules and
the RMA issued the Rules and Regulations for Regulations will be applicable to all insurance and
Cottage and Small Industries (CSI) Banks in Bhutan reinsurance companies licensed by the RMA.

iv) Rules and Regulations for Upcoming regulatory framework
Establishment of Commercial Consumer Protection Rules and
Banks: Regulations
In July 2018, the RMA issued Rules and
As mandated, the RMA will be developing
Regulations for Establishment of Commercial
and implementing the Guidelines on Financial
Banks in Bhutan 2018 and came into effect from
Consumer Protection that would ensure
22nd May, 2018. These Rules and Regulations are
protection of consumers rights. It is a critical
applicable to all Banks in Bhutan.
component of the financial service system where
regulators formulate effective and fair consumer
Penalty Rules and Regulations protection mechanism to drive consumer
2018 confidence and trust within the financial sector.
The guideline will be finalized during the third
Provided a clear framework for assessing and
quarter of 2019.
imposing administrative penalties against licensed
financial institutions. It also aims to enhance
integrity of the financial sector.

6
Exchange Rate Arrangement
and Implications

6. Exchange Rate Arrangement
and Implications
B
hutan’s external sector has been a direct impact on price movement in Bhutan.
characterized by persistent current While ensuring sustainability of the exchange rate
account deficit, particularly with India. arrangement, the RMA has a vital role in managing
As an aid, import and hydro dependent domestic credit, as it has direct implications on
economy, the imperatives of managing price level and reserves. The monetary policy
the foreign exchange reserves prudently, without operation, therefore, is pursued through (i) cash
compromising with the existing exchange rate peg reserve ratio and interest rate policy to influence
arrangement, becomes challenging. credit and monetary aggregates, and (ii) prudent
management of international reserves to support
Given the close economic and financial linkages the peg.
with India, Bhutan opted to peg the Ngultrum at
par with the Indian Rupee since its introduction With rapid pace of economic development,
in 1974. Over the years, the existing exchange Bhutan has been experiencing persistent external
rate arrangement, complemented by free and imbalances, which is partly reflected in elevated
preferential trade agreement, have further current account deficit (19 % of GDP), implying
facilitated and deepened Bhutan’s economic that the country has been building up foreign
engagement with India. With limited monetary liabilities that are largely financed through
policy flexibility due to fixed exchange rate financial inflows rather than export performances.
regime, the monetary policy operation, therefore,
is guided by the principle of safeguarding the Over the decades, Bhutan’s openness increased
exchange rate peg with the Indian Rupee through rapidly, particularly with India. However, the
readily making available Indian Rupee on demand openness has been principally led by imports,
for exchange and payment in India. constituting almost 75 percent of total trade with
India. With lack of export diversification, Bhutan
Therefore, monetary policy conducted in the continues to remain import dependent. Generally,
context of peg arrangement, involves keeping diversification can occur across products, sectors,
close track of macroeconomic developments of or trading partners, and often involves a shift
India and aligning to evolving policy stance. A to a more varied production structure, through
substantial reliance on imports from India has the introduction of new products or expansion
Chart 6.1: Change in Reserve Assets

10
60
Current account (% of GDP)
50 0
40
Nu in billion
-10
30
20 -20
10
-30
0
-40
-10
2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18
Capital & financial account Current account(RHS) Change in reserve assets

and Implications
and upgrading of existing products. Due to high investment avenue for international investors,
production costs and the lack of economies of leading to continued inward long-term direct
scale, as is the case in small developing countries, investment. The total inward FDI position stood
the introduction of new products (extensive at Nu. 10.04 billion as of end-June 2018, of which
export diversification) becomes generally difficult. 34.3 percent were from India as the single largest
Export diversification, therefore, happens mostly
through the intensive margin in these economies
i.e. through a more evenly balanced mix of Chart 6.2 FDI Position by investors
existing export products or trading partners. 4.0 as of June 2018 (Nu in Billion)
Likewise, for Bhutan, the intensive margin is 3.2

estimated at 1.2 with an extensive margin of 0.4
and a product death margin at 0.57. This implies 2.4
that Bhutan is highly dependent on electricity as
1.6
an export commodity to a single market in India.
Development and innovation of new products 0.8
for export has been very limited as indicated by
extensive margin and also the rate of product 0.0
India
Hongkong
Singapore
British
Unallocated
Thailand
Samoa
USA
France
Swizerland
Others
extinction from the market remained high during
the last ten years.
The current account broadly measures an

economy’s saving and spending behaviour;
and the persistent deficit in this account is the
reflection of economic dependence and structural
challenges.
foreign investor followed by Singapore and British
FDI has been identified as a potential, stable and Virgin Islands with 13.8 percent and 12.5 percent
alternative source of financing for sustainable respectively.
economic diversification. The economy’s
performance in relation to cheap electricity, In terms of sector, the hospitality sector has
national policy, stable government, and become one of the most popular investment
accessibility to large Indian market provided avenues for foreign investors followed by financial
support to Bhutan’s attractiveness as an services, generation and sale of electricity and
agriculture. Other important sectors such as agro-
Chart 6.3 FDI inflows by sectors as of June 2018 (in % share to total FDI)
2.6% Agriculture
0.4% 10.7%
Generation & Sale of electricity
10.7%
3.3% Diary & Agro products
Pharmaceutical
Other services
25.0% Financial service
37.9% IT and ITES

Manufacturing & Production
9% Hospitality
0.4%
Total FDI inflows of Nu.10.0 billion as of June 2018

industry and tourism, that has a greater potential liquidating), it may not therefore be necessarily
for generating both forward and backward interpreted only in terms of ‘concerns’ but also
linkages effect in the economy, have not picked in terms of ‘opportunities’ since hydro debts are
up. denominated in Indian Rupee. Thus, Bhutan’s
external debt of USD 2.65 billion as of the FY
With the availability of cheap electricity in the 2017/18 can be considered manageable because
country, manufacturing sector continues to 73.5 percent constitutes Rupee denominated debt
become attractive primarily for power intensive in which the liabilities are not subject to valuation
industries and is expected to help diversify the changes from the fluctuations of the exchange
economy and to attain self-reliance in the long rate.
run. The country’s four upcoming major industrial
parks are expected to be completed within the Within the Rupee debt, about 89.7 percent
12th FYP, whereby the investors will develop and constitute hydro power debt from the
invest in business ventures. Government of India, which are considered self-
liquidating thereby reducing the risks associated
The upcoming industrial estates will require huge with debt distress. However, the concerns on the
power supply for industries to be set up. With the delay in hydro power construction and prolonged
growing number of business applications received, debt servicing must not impose burden on the
particularly power intensive industries, there is future generations.
a need for the Government to work on ensuring
the supply of power during lean seasons or RGoB On the other hand, the Convertible Currency (CC)
may initiate energy banking with India to meet the debt amounting to USD 699.82 million (26.5%)
demand. are concessional loans from multinationals and
bilateral partners. These CC debt are subject to
To strengthen the BoP position, ‘Remit Bhutan’ exchange rate risk, which are likely to increase
was introduced in 2016, as a platform to facilitate debt burden when the domestic currency
non-resident Bhutanese to open foreign currency depreciates; from a maturity perspective these
accounts with authorized banks in Bhutan external debt are skewed towards medium to
to promote inward remittances. The inward long-term tenures limiting repayment risks. For
remittance as of September 2018 was USD 9.6 instance, India has experienced several episodes
million. of Rupee depreciation over the last decades.
During 1962, the Rupee

depreciated to 4.8, in
Chart 6.4 External Chart 6.5 Indian Rupee 1980 to 9.1, increasing
debt by currency debt by sector
to 25.8 in 1990 and
Non-hydro: further to 46.8 in
10.3% 2000 and recently,
CC: 26.5% Hydro: in October 2018, the
89.7% Rupee depreciated to
INR: 73.5% 74 per US $. Within
the last one year, the
INR depreciated by
almost 15 percent.
Rupee depreciation
is an external shock
on Bhutan’s CC debt. It was found that the 15
In absence of adequate domestic savings to percent depreciation of Rupee during September
finance the investment needs, external borrowing 2017 to September 2018, resulted in an increase
has become an important source of public finance. of CC debt services cost by Nu.272 million,
Bhutan continued to resort to external borrowing expanding the debt stock to Nu.5.4 billion.
to finance development, the country’s external
debt has consistently increased to over 110 Against this backdrop, resorting to different
percent of GDP in the FY 2017/18. type of external debt need to be well calibrated
in terms of purpose, tenor, currency and other
However, the debt being incurred mostly on terms and conditions. To ensure sustainable
account of hydro power developments (self- debt, the government has instituted National
and Implications
Chart 6.4: Total international reserves

1600 13.2
1400 13.0
Months of import coverage

1200 12.8
USD in million
1000 12.6
800 12.4
600 12.2
400 12.0
200 11.8
0 11.6
2013/14 2014/15 2015/16 2016/17 2017/18
CC reserves INR reserves Total months of merchandise imports-RHS
Debt Policy in 2016, which restricts excessive to defend against potential future exigencies.
borrowings, further easing the distress of debt The RMA, being the manager and owner of the
burden on the economy. The joint World Bank- official external assets, uses its best endeavours
IMF Debt Sustainability Analysis Report (2017) to manage the external reserves through the
also considers Bhutan’s risk of debt distress to principles of maintaining safety, liquidity and yield,
be ‘moderate’ based on the unique mitigating in that order, and maintain the external reserves
factors. at an adequate level for meeting necessary
international transactions. The RMA also adopts
One of the most important factors for the appropriate policy guidelines for decisions
sustainability of current account deficit is the level regarding the allocation and composition of
of international reserves as they serve as a buffer reserves in accordance with international best
at the time of crisis. practices.
Given the rising debt and import, in absence of Bhutan’s international reserves are comprised of
domestic capacity, international reserves has reserve assets of the RMA and the commercial
been playing a crucial role in mitigating external banks. Given the trade pattern, these reserve
pressure. Since Bhutan’s international reserves assets are maintained in (i) CC and (ii) Indian
are not built through export performance but Rupees (INR). The INR reserves carry more weight
rather through liability creating external flows, a in terms of day to day liquidity needs and to
wide range of monetary policy instruments have anchor currency to reduce the foreign currency
been developed along with prudent management exposure risk. The conversion of CC to INR has
of reserves to manage external pressure on remained instrumental in financing the INR
the economy. It also commensurate with the liquidity needs.
precautionary constitutional mandate, which
states: “A minimum foreign currency reserves Total international reserve at the end of FY
that is adequate to meet the cost of not less than 2017/18 stood at US $ 1,110.90 million, of
one year’s essential import must be maintained.” which 78.9 percent were CC and remaining 21.1
This adequacy measure may be way above “the percent INR reserves. International reserves
reserve adequacy assessed to be around 6 months remained adequately to finance 13.4 months of
of imports” considered by IMF, although defining merchandise imports, while covering 42.5 percent
the adequacy has its own limitations and requires of public external debt.
judgment for each country.
Given Bhutan’s financial and trade integration
While keeping in mind constitutional requirement, with India, and high composition of INR debt,
the RMA’s reserve management policy is maintaining the Ngultrum peg exchange rate with
further guided by the principles to safeguard that of INR continues to remain relevant in the
the exchange rate peg with the Indian Rupee context of Bhutan’s economy.
(backing of domestic currency by external assets),

Box 6.1 Terms of Trade1
T
erms of Trade (ToT) is one
of the important indicators 320 120
for measuring the external
position in the context of
256 96
foreign trade. It measures
relative price of exports to imports
and reflects purchasing power 72
192
Price Index
of exports. Higher the ToT, more
Terms of trade
favourable the price development
of domestic products in the 128 48
international trade market. If price
of product that a country intends
to export develops more favourably 64 24
than the price of a product that it
intends to import, then country will
experience improvement in terms 0 0
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
of trade.
According to the price indices, Import price index Export price index
with the commissioning of Tala Terms of Trade (RHS)
hydro project, Bhutan’s terms of
trade improved during 2006 to
2008. However, since 2009, ToT 250
started deteriorating and remained
below 100 percent. There has been
constant decline in ToT with an 200
average of 2.9 percent annually
with higher increase in import price
compared to export price level. 150
Price Index
Import price rose by an average

of 7.6 percent compared to 3.6
percent increase in export price 100
level during the period. The lowest
level of ToT was recorded at 74.6 in
2012, followed by high merchandise 50
trade deficit of 25.5 percent of GDP.
Further, movement of ToT is largely
driven by volatility in import prices 0
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
relative to consistent export price

level. For instance, there has been
huge fluctuation in import prices ToT for fuel Fuel import price index
in the recent years, largely driven
by the changes in fuel prices and Electricity export price index
1
Terms of Trade for Bhutan is computed using Custom data compiled by the Department of
Revenue and Customs, Ministry of Finance.

and Implications
commodity prices in the global

market. On other hand, electricity 15 110
being the single largest exported
item, the price of electricity export is 5 88
predetermined and fixed for certain
Trade balance (% of GDP

time periods, resulting into minimal
Terms of trade
-5 66
increase in overall export price.
Thus, rate of increase in export price -15 44

level is not able to catch the rise
in import price level, resulting in -25 22
constant fall in ToT. The fall in overall
imports in 2017 by 0.5 percent was -35 0
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
soley due to fall in import volume
on account of declining hydro power
related imports. Overall drop in Trade balance (% of GDP)
volume of imports was more than Terms of Trade (RHS)
adequate to cover 11.6 percent
increase in import prices. While
than sufficient to finance a liter of diesel
growth in export price level and volume has
imports and 24 units (additional 9 units) of
equally contributed for 5.8 percent increase
electricity were required to export for a liter
in merchandise exports in 2017, where
of diesel import in 2014, indicating a loss
export price level rose by 2.8 percent. This
in purchasing power of electricity export
clearly indicates that deterioration in ToT
relative to fuel imports.
adversely affects the trade balance.
Although sharp drop in global fuel prices
The ToT for fuel is defined as relative change
in 2015 and 2016 has positively impacted
in export price of electricity and other fuel
ToT position, the recent increase in oil price
(bitumen and coal) exports to import price of
has affected ToT in 2017. Of 13.3 percent
fossil fuels, largely petrol and diesel. Global
year-on-year growth in fuel imports in 2017,
fuel price increased from USD 60 per barrel
8.9 percentage points was accounted for
in 2009 to almost USD 100 per barrel in 2014.
change in prices and rest due to increase
in volume of fuel imports. While drop in
On the contrary, there has been minimal
electricity exports by 8.0 percent was mainly
growth in electricity export prices, the
due to fall in volume of electricity exports.
average electricity export price increased
to Nu. 2.1 per unit in 2014 from Nu. 1.8 in
The change in ToT has large impact on
2009. Owing to steep rise in fuel import
trade. The trade balance closely follows the
prices from 2010 to 2014 and marginal
movements of ToT. As per income ToT, due
growth in electricity export price, the fuel ToT
to declining purchasing power of exports
worsened at record low of 61 in 2014 from
between 2009-2017, average trading loss was
93 in 2010. For instance, in the year 2009,
estimated about 10% annually.
16 units of electricity exports were more

Box 6.2 Development in Effective Exchange Rate1
The Ngultrum is pegged at par to the Indian

Rupee due to Bhutan’s high financial Nominal Effective Exchange Rate (NEER)
and trade integration with India. The 100 2.5
Real Effective Exchange Rate (REER) has
been moderately depreciating year-on-
2.0
year since the last quarterly of 2017. The 98
REER indicates domestic economy’s price
competitiveness vis-à-vis trading partners Depreciation 1.6
and predicts looming balance of payment 96
problem. 1.2
Appreciation
94
The INR, and subsequently the Ngultrum, 0.8
has been depreciating steadily since 2010.
The Nominal Effective Exchange Rate 92
0.4
(NEER) depreciated by 0.7 percent in the
second quarter of 2018, following the sharp
depreciation in INR by 3.9 percent against 90 0.0
2010Q1
2010Q4
2011Q1
2011Q4
2012Q1
2012Q4
2013Q1
2013Q4
2014Q1
2014Q4
2015Q1
2015Q4
2016Q1
2016Q4
2017Q1
2017Q4
2018Q1
2018Q2
US dollar. In addition to pegged exchange
rate with INR, India being Bhutan’s
largest trading partner, accounting more NEER Nominal exchange rate (USD/Nu.)
than 75 percent of total trade of Bhutan,
development in NEER is heavily influenced
by INR exchange rate fluctuation.
Similarly, the movement in the real 110 Real Effective Exchange Rate (REER)
effective exchange rate in Bhutan is
strongly affected by change in INR
exchange rate and price developments in 104
India. At the end of second quarter of 2018,
REER depreciated by 4.1 percent, more
98
than depreciation of NEER. The higher real
depreciation in Ngultrum was mainly due
to record low inflation at 2.5 percent in 92
Bhutan, compared to 4.9 percent inflation
in India. Despite favourable exchange
rate in the recent years, there has been 86
limited impact on the export growth due to
narrow domestic productive capacity. The
80
depreciation rather negatively impacted on
2010Q1
2010Q4
2011Q1
2011Q4
2012Q1
2012Q4
2013Q1
2013Q4
2014Q1
2014Q4
2015Q1
2015Q4
2016Q1
2016Q4
2017Q1
2017Q4
2018Q1
2018Q2
the import of essential items and cost of

external debt servicing other than INR debt.
Real Exchange Rate with INR REER
1
The nominal and real effective exchange rate are computed using price and nominal exchange rate data
compiled by the IMF.

7
Financial Inclusion
and Payment System

7. Financial Inclusion
A
ccess to useful and affordable time, greater inclusion will make the interest rates
financial products and services are more effective as a policy tool, facilitating the
necessary elements for operating central bank’s efforts to maintain price stability.
transactions, payments, savings, In addition, with financial inclusion, a broader
credit and insurance for a financially base of depositors and presence of more
inclusive economy. diversified lending will also contribute to financial
stability. However, greater financial access will
Financial inclusion can be an important enabler of also increase financial risks if it results from
overall economic transformation since access to rapid credit growth or the expansion of relatively
financial services and digitization and technology unregulated parts of the financial system.
moves hand in hand in this modern era.
Particularly for a central bank, financial inclusion Recognizing the significant role of financial
acts as a double edged sword. inclusion in spurring economic transformation,
the RMA has embarked to achieve greater
Firstly, access to appropriate financial instruments financial inclusion in the economy adopting three
allow the poor or the disadvantaged to invest in important principles- collaboration, coordination
physical assets and education, reducing income and consolidation. The National Financial Inclusion
inequality and contributing to economic growth. Strategy (NFIS) 2018-2023 and National Financial
Secondly, financial inclusion has an important Literacy Strategy (NFLS) 2018-2023 which was
implication for monetary and financial stability, implemented in August 2018, provides an
and policy areas that sit at the very core of central enabling, coordinated and collaborative space for
banking. Increased financial inclusion will help joint participatory planning in promoting overall
to significantly change the behaviour of business financial inclusion in Bhutan, touching both the
firms and consumers, and consequently, influence demand as well as the supply front dynamics.
the effectiveness of monetary policy. At the same
Financial Inclusion Strategic Framework
VISION
Enhanced access to and usage of quality and
affordable formal financial services by all Bhutanese
through an inclusive financial system
Appropriate Financing Financial

Financial
Pillars Financial Accessibility/ for Economic Capability and
Product and Growth Consumer
proximity
Services protection
Financial Supportive Institutional

Policy and Appropriate Coordination and
Inclusion Regulatory Infrastructure Commitment
Enablers Framework

Financial Inclusion
and Payment System
State of Financial Inclusion
The main financial players in promoting financial 14 percent of total loans and advances in 2017.
inclusion includes five banks, three insurance The underdeveloped infrastructure, poor business
companies (two direct insurers and one re- development and limited alternative sources of
insurer), three micro-finance institutions (MFIs) financing were identified as constraints for CSI
and other financial services providers (FSPs) development.
including the Credit Information Bureau of
Access points remain important indicator to
Bhutan (CIB), National Pension and Provident
evaluate the access to finance. The access points
Fund (NPPF), Central Registry (CR), Royal
includes bank branches, ATM agents or PoS devices
Securities Exchange of Bhutan Limited (RSEBL)
that perform cash-in and cash-out transactions.
and Nubri Capital Private Ltd. The deposits, loans,
MBoB and MPay are not included in access points.
insurances, reinsurance, pension and provident
As of December 2017, 64 percent all access points
funds, credit assessment and payments are the
(3,314) are agents (bank & Insurances) and 23
main financial products and services available to
percent are Point of Sale (PoS). Of the 2,133 agents
Chart 6.1: Access to Financial Product and Services (% share)

120
100
80
% share
36%
84%
82%
60
40
64%
20
16% 18%
0
Saving Credit Insurance
Inclusion Exclusion
in the country, 19 percent are bank agents and 81

all the population under the segment of financial
percent are insurance agents. Rest are branches
inclusion in Bhutan.
(5 %), ATMs (6%) and extension accounts (2%).
In terms of access to financial products and
services, 64 percent of adults in Bhutan had a
Table 5.1 Credit to CSI as of December 2017
saving accounts, while only 16 percent have access
to credit, followed by 18 percent holding life Enterprises Amount % Share
insurance as of December 2018. This indicates that (Nu. In billion)
the access to finance in Bhutan remained skewed Micro 2.97 2.87
only towards opening of accounts and availing
Cottage 3.25 3.14
financial services from the financial institutions.
Small 11.72 11.34
Other important indicators to assess financial Medium 22.94 22.02
inclusion is lending to cottage and small industries Large 16.64 15.91
sector (CSI). While CSI remained one of important
Total MCSML 57.32 55.48
sector, which was recognized as potential sector
for production and employment generation. In Non-Enterprises 46.00 44.52
terms of access to credit for CSI accounted only Total 103.33 100.00

Financial Inclusion Initiatives
i. Country Award agencies and other important stakeholders

towards promoting financial inclusion.
The RMA received the Country Award for 2018 for
the Asia and the Pacific region, and a Certificate ii. National Financial Inclusion Strategy
for being Global Finalist-Asia and the Pacific for (NFIS) 2018-2023 and the National
Global Money Week 2018 held during the 7th Financial Literacy Strategy (NFLS) 2018-
Global Inclusion Awards 2018, organized by Child 2023
and Youth Finance International, the Argentina’s
His Excellency, Ambassador of Bhutan to Kuwait represented the RMA and received 2018 Global Inclusion Awards
in July 2018
G20 Presidency and Global Partnership for The RMA launched the NFIS 2018-2023 and NFLS
Financial Inclusion with the support of the G20- 2018-2023 on August 30, 2018 at the Financial
2020 Saudi Secretariat. His Excellency, Kutshab Institutions Training Institute. Both the Strategy
Tshering Gyaltshen Penjor, Ambassador of Bhutan documents are the outcome of the international
to Kuwait represented and accepted the award on conference, hosted under Bhutan Economic
behalf of RMA and Bhutan. Forum for Innovative Transformation, which was
themed towards promoting financial inclusion.
The RMA is deeply honored to receive the global
recognition on behalf of the collective efforts As per the implementation plan, three NFIS
put in by all financial institutions, government
The RMA launched the NFIS 2018-2023 and NFLS 2018-2023 on August 30, 2018 at FITI, Thimphu

Financial Inclusion
and Payment System
working groups have been formed, comprising is an important priority of the RMA’s objective
Products, Channel and Consumer Protection and of broadening access to credit where MFIs and
Financial Literacy. CSI play a crucial role in financial inclusion, by
empowering people to use access to financial
The Groups have also formulated the cross- services for productive purposes. The system
sector NFIS Action Plan 2018-2023. To promote is expected to lay down strong foundation and
awareness, the RMA also conducted the NFIS and catalyze the evolution of MFI and CSI sectors
NFLS sensitization workshop with the financial through enhanced operational efficiency and
institutions and representatives of the financial increased productivity.
service providers, relevant government agencies,
key international development partners, NGOs The Hon’ble Finance Minister graced the event
and other relevant stakeholders. which was attended by senior officials from the
Government and the financial institutions.
iii. Druk MicroFin—An Integrated MFI
and CSI Banking Platform iv. Students Business Seedling (SBS)
Program
The RMA launched Druk MicroFin Solution on May
16, 2018. It is an integrated core banking system Following His Majesty’s visit to Desi High School
hosted at the RMA for the MFIs and the CSI banks. on March 01, 2018, the RMA was commanded
The system enabled end-to-end with a hand-held to organize a competition for business ideas
micro ATMs and Mobile Banking delivery channels with the objective of encouraging creativity and
in real-time to increase access and delivery of innovation and introducing students to the idea of
financial services, particularly in reaching remote entrepreneurship and self-employment as viable
areas that are underbanked and underserved by alternative to limited public sector employment.
mainstream financial services and products. As a result, the SBS Program was initiated by the
RMA as a structured model to allow replication
The integrated system was implemented with in other schools and incorporation into the
the view to reduce cost and resource burden mainstream education curriculum, if successful.
to the MFIs and the CSI, given their relatively
small- and medium-sized businesses. The system A total of 154 students participated in the
The Hon’ble Finance Minister graced the launching of Druk MicroFin on May 16, 2018 at FITI, Thimphu

Dasho Governor and Organizers with Desi High School SBS winners and their parents on August 11, 2018 at Desi High School, Thimphu
program. Of which 23 were selected to undergo v. Meeting with Arekha Middle

a four-month program involving design thinking Secondary School (AMSS)
workshop, field visits to local entrepreneurs and
businesses, interactions with mentors and boot A total of 69 students with four teacher guides
camp on basic entrepreneurship and business who were on Edutainment Tour on the theme of
proposal. The 23 students spent their summer “Paving the Way Ahead” met Dasho Governor
vacation in July to prepare their business on August 17, 2018 to familiarize the RMA and
proposals and basic prototypes. The final sensitize on young entrepreneurship and values
pitching session was held on August 11, 2018. of savings at a young age. The AMSS has also
Each student was given 5 minutes to pitch their been recognized as one of the most enthusiastic
idea followed by a 3 minutes’ questions and recipient of Youth Ethics (YE) Banking during the
answers session. 2018 Global Money Week, an incentive based
program for school children being introduced
Five students received the awards. The top practically to the banking world since March
three students were awarded with two years’ 2018. Since then, AMSS has chosen the BDBL
scholarship from His Majesty the King and two as their partner bank in seeking assistance in
students received a consolation prize in the form opening accounts and other banking services. To
of one year’s scholarship from the RMA. promote saving habits among young students,

Financial Inclusion
and Payment System
priority of educating the next generations.

Curriculum mapping initiatives with the Ministry
of Education has been identified as one of the
immediate NFLS implementation plan.
Series of joint collaborative workshops,

discussions and peer learnings programs has
been developed with the aim to promote
national financial literacy curriculum. The
following are the key stakeholders identified for
the above consultation:
• Mainstream Financial Education at Schools:

A formal financial literacy curriculum aims
to infuse a basic financial literacy topics
using the mode of existing relevant subjects
in coordination with the Royal Education
Council. Prior to the subject infusion, a pre-
formulation effort was carried out, involving
the experts from the Royal Institute of
Management (RIM) to develop a common
financial literacy curriculum, which was also
formally launched during the Global Money
Week 2018 as the teacher’s and student’s
guidance Handbook. The handbook
has also been translated into Dzongkha
for relevant stakeholders as an effort to
integrate in the most accessible format.
• Non-formal Education System (with the

focus on Women Groups):
The RIM curriculum also translated into
Dzongkha will be encouraged to be mapped
with the Non-Formal Education Centers
for empowering the illiterate section of
the community, particularly the vulnerable
the BDBL presented Nu. 300 each to all 69 women learners.
students as a seed money for promoting saving
culture in their school. • Collaboration with Financial Institution
Training Institute (FITI):
vi. Integration of Financial Literacy The existing curriculums on financial
Curriculum in the Formal Education literacy and Student Business Seedling
System (SBS) Program manual are also expected to
be further integrated as financial literacy
Financial education forms an integral part of programs of FITI with the aim of promoting
NFLS 2018-2023 under the strategic priority of into the TOT programs for identified target
educating the next generation. Thus, developing agencies. The FITI will also explore summer/
an endorsed financial literacy curriculum in the winter programs particularly focusing the
formal schools and other relevant intermediaries youth and other targeted agencies.
forms an important action to support the strategic

Box: 6.1 Launch of “Jab-chor” Platform
(13 December 2018)
To commemorate twelve years of His Majesty’s benevolent reign, the Royal Monetary Authority
of Bhutan launched “Jab-chor”- a platform to help our youths nurture and grow their business
ideas through access to equity financing.
In keeping with the national responsibility of responding to the concerns and aspirations that
emanate from the Royal Throne, the RMA is honoured to have partnered with the Ministry of
Economic Affairs, the Royal Securities Exchange of Bhutan, the Thimphu Tech Park Limited and
the Bhutan Chamber of Commerce and Industry to launch “Jab-chor” to promote innovation,
creativity and enterprise among our youths. The Jab-chor was inspired by His Majesty’s
aspirations for our youths:
While opportunities for access to finance continue to be strengthened, especially from the
commercial banks and MFIs, the RMA is also exploring more innovative platforms for access to
finance through alternate source of financing such as angel investors, P2P and crowd funding.
Enabling such innvotive platforms would provide more choices and product diversity in addition
to traditional bank borrowing.
Young entrepreneurs particularly startups are faced with the challenge of early start up equity
despite having great business ideas. On the other hand, there are well-to-do individuals and
private companies that have capital to spare and expect effective return on investment. One
innovative solution and access to equity finance that RMA, RSEBL, BCCI, Company Registrar and
TTP jointly offers is JAB-CHOR – a formal alternative source of financing platform to bring together
young entrepreneurs and angel investors.
The platform will complement Priority Sector Lending (PSL) initiatives towards promotion of
Cottage Small Industries. Under the PSL, primary production related projects are eligible for 100%
loan backed by insurance, while all other projects have loan to equity ratio of 70:30.
Jab-Chor is an initiative to partner with innovative entrepreneurs and grow with them into a
successful venture, based on trust and confidence supported by legally executed business
partnership deed, recognized by the laws of country. The jab-chor ventures will help investor
enter into a financial partnership with a trust worthy entrepreneur, who will give meaning to
your investment and function within a legally defined relation to help you earn dividends, both
in cash and goodwill. On the first series of Jab-Chor platform, five business ideas, carefully
screened, groomed and presented to the investors for possible equity ownership.
Dasho Governor launched “Jab-chor” Platform on December 13, 2018 at BCCI, Thimphu

Financial Inclusion
and Payment System
Box: 6.2 Bhutan Economic Forum

for Innovative Transformation (BEFIT) 2019
Catalyzing the Cottage and Small Industries Sector to

Drive Bhutan’s Economic Diversification
Background
Bhutan Economic Forum for Innovative Transformation (BEFIT) was inspired by His Majesty’s
vision that our recent example in ensuring a successful democratic transition must be
accompanied by successful economic transformation based on the foundations of a just,
equal and harmonious society. The BEFIT is a national platform to bring together a wide
range of expertise to share best practices and discuss innovative solutions to emerging
national and regional economic challenges, with the overarching objective of transforming
and bettering lives.
The BEFIT aims to establish itself as a credible and impact-oriented national forum.
Therefore, partnerships with domestic institutions and reputed multilateral institutions are
important in ensuring meaningful dialogues and sustainable results. The theme for each
BEFIT event is carefully selected to address a pressing current need in close consultation
with relevant stakeholders. The expected outcomes are clearly identified from the beginning
while partnerships ensure collective ownership and sustained commitments to implement
the expected outcomes.
Catalyzing the Cottage and Small Industries Sector to Drive

Bhutan’s Economic Diversification
Recognizing the potential of Bhutan’s small and medium enterprises sector, locally termed
as the cottage and small industries (CSI) sector, to diversify the economy, boost employment
and domestic production and promote inclusive growth, a directed lending strategy
called the Priority Sector Lending (PSL) initiative was implemented from January 2018 to
improve access of credit to CSIs. While entrepreneurs and small business face a myriad of
challenges, the PSL was introduced as the first crucial step to ease access to credit from
the financial institutions. Designed as an integrated platform to coordinate the support
and interventions of the government with better access to bank finance, the PSL platform
has been instrumental in enhancing collaboration and coordination among the various
government agencies.
The experience of nine months of implementation of PSL has re-iterated pressing

challenges faced by the CSI sector such as manually-driven production processes and
limited use of technology, and lack of market access and entrepreneurial skills. These
challenges formed the basis for the formulation of the government’s Cottage, Small and
Medium Industry (CSMI) Policy 2012. The CSMI Policy was backed by a Development Strategy
(2012-2020) and a series of Action Plans that revolved around the following six strategic
areas:
i. Strengthening the policy environment and institutional framework

ii. Strengthening the legislative framework and enterprise environment
iii. Facilitate access to finance and incentives
iv. Enhance competitiveness and innovation

v. Improve market access
Enhance employment and develop a culture of entrepreneurship. The CSMI Policy was based
on providing a holistic intervention package to develop Bhutan’s CSMI sector. However, most of
the challenges identified in 2012 remain largely unaddressed today, while economic and moral
arguments to revive Bhutan’s CSI sector have only become more pressing today.
The theme for BEFIT 2019, “Catalysing Cottage and Small Industries to Drive Bhutan’s Economic
Diversification”, was accordingly identified. Bhutan’s GNH-led approach to development has
always emphasized inclusive and sustainable development while His Majesty the King’s
aspirations for the creation of “just and harmonious societies” has further crystallized the
expected outcomes of this GNH-led development process.
Looking from an economic lens, societies are just and harmonious when there is equitable and
inclusive distribution of gains from development, when there is shared prosperity, and when
citizens who are willing to engage themselves productively have the means to do so. Bhutan has
reached a critical demographic juncture. Our young working age population has been steadily
increasing, with the highest concentration in the 25-29 and 20-25 age groups, closely followed
by the 15-19 and 10-14 age groups. The 2017 Population and Housing Census of Bhutan was in
fact an ice breaker- that call for interventions to meaningfully engage the increasing size of the
young working population and take opportunities for a demographic dividend through reduced
dependency ratios.
However, taking advantage of this opportunity for a demographic dividend means that the young
population must first have the opportunities to productively engage themselves. And it is the CSI
sector that holds the most potential to productively engage our youth. The theme for BEFIT 2019
is also in line with the 12th Five Year Plan focus on diversification under the broader vision of
creating just and harmonious societies.
BEFIT 2019 is expected to assist authorities in reviewing the CSMI Policy through a renewed
lens to identify the interventions needed to catalyze the CSI sector as an important driver of
Bhutan’s economic diversification and economic transformation. Outstanding recommendations
articulated in the Policy and new insights from BEFIT 2019 will assist authorities to draft a CSI
Master plan that will articulate the medium-term interventions required to set-up a vibrant and
resilient ecosystem to transform Bhutan’s CSIs into an important agent of economic change.
Collective ownership, coordination and collaboration among stakeholders will be key in
identifying challenges, finding solutions and in implementing the solutions. Therefore, in
preparation for BEFIT 2019, key domestic partners have already been identified and consulted.
There are strong commitments and ownership at the highest level while working groups have
been formed and have been meeting regularly since August 2018 to discuss challenges and
strategies to address the challenges.
BEFIT 2019 will be used as a national platform to discuss and finalize the strategies and
solutions, learn from international and regional best practices, and identify remaining gaps and
interventions needed. BEFIT 2019 will focus on the following thematic areas under the broad
theme of “Catalyzing Bhutan’s CSI Sector to Drive Bhutan’s Economic Diversification”:
i. Capacity development and entrepreneurial culture
ii. Innovation and technology
iii. Market access
iv. Access to finance and risk management
Cutting across all the above themes is a focus on improving the underlying regulatory
environment through smart policies and leveraging fintech in crafting efficient solutions.

Financial Inclusion
and Payment System
Modernization of Payment System
T
o facilitate smooth flow of payment iv. Authorization of Payment
systems and to foster an enabling
environment for innovation and Systems
promote digital based payment The RMA authorized the wallet services, mobile
platform, the RMA in collaboration check deposit, mobile application and PoS service
with the banks and private business entities, providers. Application from 27 e-commerce
initiated several payment system infrastructures entities were also integrated to the RMA payment
during 2017. In continuation to the past efforts, gateway. Currently, there are 19 licensed
significant progress has been made by the RMA in e-commerce entities integrated to the RMA
terms of payment and settlement systems through payment gateway.
reforms in the legal frameworks and automation
of systems. Some of the notable initiatives during v. National Financial Switch
the FY 2017/18 includes the following:
of India and Bhutan Financial
i. E-Money Issuers Rules and Switch (NFS-BFS) Integration
Regulations 2017 Project
The NFS-BFS integration project was initiated
E-Money Issuers Rules and Regulations was
to integrate the Bhutan Financial Switch of
approved by the RMA Board during the 130th
Bhutan and National Financial Switch of India to
Board meeting held on September 29, 2017 with
enable the cross-border ATM transactions for
the objective to promote regulated electronic
Cash Withdrawal, Balance Enquiry and Reversals
money and financial inclusion through extension
along with Purchase, Void and Reversals for PoS
of financial services beyond the conventional
terminals in India and Bhutan. The project is
branch-based channels.
planned to be executed in two phases. Under
Phase I, the BFS will accept the RuPay co-branded
ii. Payment & Settlement Systems cards issued by the participating banks in India
Rules and Regulation 2018 at all card acceptance channels of BFS ATM and
The Payment & Settlement Systems Rules and PoS terminals in Bhutan. Under Phase II, the
Regulations 2018 was implemented on January participating banks in Bhutan will issue RuPay
30, 2018 for effectively regulating, supervising, co-branded cards to be accepted at all card
and overseeing payment service providers and acceptance channels of NFS ATM and PoS in India.
payment system. Connection of this two Switches will be a new
milestone in promoting a seamless payment and
settlement system between India and Bhutan.
iii. Operating Procedural
Guidelines for Bhutan Financial vi. Global Interchange for
Switch Financial Transactions (GIFT)
Operating procedural Guidelines for BFS was Payment System
approved during the 56th EC Meeting held
on June 21, 2018. The Operating Procedural The RMA also initiated the implementation of
Guidelines defines in detail the operating and GIFT Payment System to support the following 3
settlement procedures for the members of the types of payment services – RTGS, BISS and Bulk
BFS network to follow the best practices to ensure payment services.
smooth, secure, and effective operation of the
system, including provisions on effective dispute a) Real Time Gross Settlement
management. The BFS is a PCI DSS Certified Service (RTGS)
ecosystem “Payment Card Industry Data Security
Payments made through this service are settled
Standards”, an international standard in terms of
immediately on receipt. The RTGS would allow
card data security and processing.
the transfer of money from one bank to any other

bank on a “real time” and on a “gross” settlement and also provide an avenue for home-grown
basis. The RTGS systems are typically used for a e-Commerce merchants to expand their
large-value transaction that require and receive global reach. In order to facilitate provision
immediate clearing and are also considered a of a secure and efficient e-payments and to
systemically important payment system. promote e-Commerce in the country, the
RMA has started the ground work to study
b) Batched Interbank Settlement the feasibility of international e-Commerce
modalities and identify a suitable working
Service (BISS)
model for Bhutan.
The BISS would enable high value interbank
fund transfer in a batched settlement cycle. The ii. With the growing usage of digital based
batch timings are set up by RMA in line with the payment system, formation of National
operational timings of the banks. For instance, Payment Council will be important to
there could be 5 batches in a one-day settlement advise and guide the RMA in modernizing
cycle. The services would be available on and developing the country’s payment &
Saturdays with a reduced number of batches. settlement systems. The Council will also act
like as a catalyst to overcome coordination
c) Bulk Payment Service problems between the market participants
that may hinder the attainment of common
The Bulk Payment service can handle cases where objectives. Similarly, drafting of National
multiple beneficiaries are to be credited from a Payment Systems Strategy document has
single account and vice versa. These transactions also become important to provide strategic
are targeted for mainly institutional payments or direction in implementing the strategic
large payment collection including utility bill such priorities envisioned in the Strategy document
as salaries, pension payments, loan repayments and long term vision and missions of the RMA.
etc. The Strategy document will serve as a road
map for the department in implementing any
Way Forward initiatives related to payment and settlement
systems in the country.
i. With the rapid technological advancement and
financial inclusion objectives in the economy, iii. With the implementation of e-Money Issuers
there is a growing demand for an International Rules and Regulation 2017, Payment &
Payment Gateway and an e-Commerce Settlement Systems Rules and Regulation 2018
platform in the country. The ability to pay and e-Money Issuer Rules and Regulation
for products or services using website has 2017, there is a need to review and develop
become a common phenomenon with the an integrated Payment and Settlement System
growing e-Commerce industry worldwide. The Rules and Regulation to synchronize and
implementation of payment gateway platform consolidate the dispersed regulations. The
will support the inbound international RMA will be working towards integrating these
payments particularly, in the tourism sector documents.

Financial Inclusion
and Payment System
Box: 6.3 Connecting the Bhutan Financial

Switch and National Financial Switch of India
A
s part of celebration of the facility is expected to usher safe, convenient
50th year of diplomatic and less-cash cross border digital payments
relation between Bhutan and between the two countries. In particular,
India, the RMA and National integration will enable the tourists from
Payments Corporation of India in India to access more the 231 ATMs and 759
collaboration with the Reserve Bank of India PoS terminals, deployed by our banks across
(RBI) is preparing to launch an innovative the country. This will benefit the country in
financial services of connecting the Bhutan earning Indian Rupees by stimulating digital
Financial Switch and National Financial Switch purchasing power to acquire transactions of
of India, to further strengthen the economic the tourists/travelers from India to Bhutan,
and financial linkages between two countries. and reduces the inconveniences and inherent
risk associated with carrying large amounts of
Financial Switch System is the process of
INR cash.
inter-connecting the cross-border Automated
Teller Machines (ATM) and Point-of Sales (PoS) In the same way, the second phase of the
between two countries. The RMA initiated the project will enable issuance of our local cards
project in June 217, aimed of interconnecting for use in India at more than 250,000 ATMs
the ATMs and the PoS in the two countries and 210,000 PoS terminals. The facility is
to facilitate the travelers to seamlessly use expected to ease Bhutanese who visit India for
their banks Debit/ATM cards at AMTs and studies, pilgrimage and medical treatments,
PoS access points, without the need to rely and also address the inconveniences and risks
upon international cards- such as Visa and of carrying INR cash.
MasterCard, which are prohibitively expensive
The cross-border digitization will enable
to use. The project is developed at the cost of
proper monitoring of currency flows and
Nu. 24.7 million.
improved real-time statistical records for
The Authority accorded highest importance informed decision-making and pave way for
to cyber security and has conducted an policies and strategies for regulating currency
assessment towards achieving security flows. Furthermore, the integration will
accreditation of cyber security and streamline the flow of Indian Rupees into
information security to mitigate cyber the mainstream banking system and, as a
intrusion and threats from disrupting and result, enhance Indian Rupee earning into the
damaging confidentiality, integrity, and mainstream banking system and, as a result,
availability of Switch services. Being certified enhance Indian Rupee earning capacity. A
PCI DSS v3.2.1 and ISO 270001:2013 by tourist from India, for example, withdrawing
the British Standard Institute of the United Nu. 10,000 from our ATM will entail crediting
Kingdom-RMA has implemented robust set of the RMA account with the State Bank of India
control mechinisam including technologies, by INR 10,000, and so on.
policies, processes, organizational structures
The accumulated settlement amount-over
to enhance customer and stakeholders’
and above the threshold requirement, will be
confidence.
transferred into our INR reserve. In addition,
The project is implemented under two due to one-to-one fixed exchange regime with
phases. The first phase of the project will be India, there are no exchange and settlement
launched in January 2019 in Bhutan. Given the risks involved. The integration will be a
growing number of tourists from India, the significant cost saving mechanism and curtail

foreign currency outflow to the duopolistic the key drivers to enhance digital financial
cards providers, otherwise payable in US inclusion through affordable provisioning
Dollar-such as membership, compliance and of such financial infrastructure not only
transaction costs for availing their services, within Bhutan but also across the borders.
leading to questions about the sustainability The project is an exemplary digital initiative
of the investment required to meet the and if successful, extend the integration
costs of providing international cards in the of financial services between the trading
country. partners in the region instead of routing
through international payment, thereby
The financial integration will complement
reducing huge costs and risks.
financial services delivery, and act as one of

8
Annual Financial
Statement

8. RMA ANNUAL AUDITED ACCOUNTS : FY 2017/18
I
n accordance with Section 164 of the RMA Assets
Act of Bhutan 2010, the annual audit of the The total assets of the RMA comprises of foreign
Authority’s accounts for the period ending assets, domestic assets, and non- financial assets.
June 30, 2018 was carried out by Rinzing Foreign Assets increased by 4.6 percent from
Financial Group. Nu.73.27 billion in 2017 to Nu.76.66 billion in
In this overview of the RMA’s Annual Audited 2018, mainly on account of the significant increase
Accounts, FY 2016/17 is referred to as 2017 and in term deposits from abroad which has increased
FY 2017/18 as 2018. Factors that influenced the to Nu. 49.74 billion in 2018 compared to Nu.42.15
RMA’s annual accounts for the year 2017 are billion in 2017.
summarized below. Domestic Assets increased from Nu. 598.57
Balance Sheet million in 2017 to Nu. 750.33 million on account of
The total assets and liabilities of the RMA for the increase in cash in hand, balances with banks and
year 2018 was Nu. 77.76 billion, which increased other financial assets which increased by 487.7
by 4.8 percent from Nu. 74.18 billion in 2017. percent, 27 percent and 14 percent respectively.
Non-Financial Assets includes fixed assets,
Liabilities inventories and other assets, increased by 12.9
Total Liabilities of the RMA are made up of
percent from Nu.308.29 million in 2017 to
three major components, namely the Capital
Nu. 348.16 million in 2018. The increase was
and Reserves, Foreign Liabilities and Domestic
contributed by increase in fixed assets and
Liabilities.
inventories during the year.
Capital and Reserves increased by 17.5 percent
from Nu.17.82 billion in 2017 to Nu. 20.93 billion Income and expenditure
in 2018. An increase in capital and reserves was The total operating income of the RMA in 2018
driven by the revaluation gain amounting to Nu. was Nu.2.10 billion, which improved by 7.3
2.94 billion in the year 2018. There was also an percent from Nu.1.95 billion in 2017.
increase of 48.3 percent in the profit in 2018 as The contributing factor for this improvement was
compared to 2017. On the other hand, revaluation owing to higher interest on foreign investment,
reserves decreased marginally from Nu.13.95 interest of ways and means advance from
billion in 2017 to Nu.13.61 billion in 2018. RGOB, commission and fees, income from
Foreign Liabilities1 stood at Nu. 20.23 billion other sources and other income. On ther hand,
in 2018 which was an increase of 55.3 percent components such as interest on rupee investment,
compared to the previous year. This increase was interest on domestic investment, royalty from
on account of increase in due to international commemorative coins and sale of foreign
institutions from Nu. 3.90 billion in 2017 to Nu. currencies experienced a decline in the review
10.85 billion in 2018, on account of the RBI swap period.
facility amounting to INR 6.7 billion. Concurrently,
The total operating expenses decreased by 13.5
the amount due to IMF, due to government and
percent from Nu. 385.28 million in 2017 to Nu.
interest accrued has increased by 8.4 percent,
333.38 million in 2018. The decrease was mainly
25.6 percent and 132 percent respectively.
contributed by extraordinary expenses and
Domestic Liabilities2 decreased by 15.5 percent hospitality and entertainment by 87.9 percent and
in the year 2018 mainly on account of decrease in 80.8 percent respectively.
sweeping account of banks from Nu. 6.27 billion
in 2017 to Nu. 2.81 billion in 2018. Additionally, The surplus generated during the year was
the decrease in amount due to banks, due to Nu. 1,763.35 million, recording growth of 12.5
government, other liabilities and managed fund percent. After accounting for the cost of monetary
also contributed to this decrease. policy operation of Nu. 519.71 million, the net
surplus of Nu.1,585.24 million was transferred to
the balance sheet.
1
Consists of dues to the IMF, government and government agencies’ foreign currency accounts, deposits of other
foreign financial institutions such as the World Bank, ADB, and Kuwait Central Bank, GOI Stand-by credit facility.

Annual Financial
Statement
2
Consists of notes and coins in circulation, due to banks, due to government (MoF Refundable deposit & MoF
revaluation reserve), sweeping accounts and other miscellaneous liabilities.

Annual Financial
Statement

Annual Financial
Statement

9
Statistical tables

TABLE 1. Gross Domestic Product at Current Prices
Ngultrum in Million
Year Share of
Sector GDP in
2013 2014 2015 2016 2017 2017 (%)
1. Agriculture, livestock and forestry 16,969.71 20,050.39 22,084.67 24,825.54 28,591.14 17.37
1.1 Crops 9,404.66 12,029.02 13,442.91 15,044.50 17,513.39 10.64
1.2 Livestock 4,537.22 4,869.27 5,210.04 5,789.16 7,057.30 4.29
1.3 Forestry and logging 3,027.84 3,152.09 3,431.72 3,991.88 4,020.45 2.44
2. Mining and quarrying 2,793.69 3,376.43 4,484.27 6,455.09 6,954.62 4.22
3. Manufacturing 8,778.67 9,705.14 10,543.50 11,085.11 11,938.23 7.25
4. Electricity and water 15,230.29 16,917.83 18,933.11 19,909.45 21,766.87 13.22
5. Construction 17,826.07 18,479.70 20,649.74 24,280.44 26,126.36 15.87
6. Wholesale and retail trade 6,823.31 8,471.66 10,233.35 11,798.32 13,460.01 8.18
7. Hotels and restaurants 1,616.37 2,045.91 2,485.70 2,863.56 3,476.78 2.11
8. Transport, storage and
9,806.81 11,508.69 11,892.66 13,157.69 14,923.42 9.06
communication
9. Financing, insurance and real
8,064.75 9,048.88 9,746.42 10,892.39 11,667.34 7.09
estate
9.1 Finance 5,781.09 6,461.22 6,905.29 7,574.04 7,945.71 4.83
9.2 Real estate 2,198.01 2,489.76 2,738.74 3,176.94 3,408.28 2.07
9.3 Business services 85.66 97.89 102.39 141.41 313.35 0.19
10. Community, social and personal
11,536.50 12,953.67 14,854.26 16,488.73 16,981.78 10.32
services
10.1 Public Administration 6,981.50 8,079.11 9,888.87 11,209.69 11,647.29 7.07
10.2 Education and health 4,555.00 4,874.55 4,965.38 5,279.03 5,334.49 3.24
11. Private social, personal and
436.86 471.81 503.70 532.45 654.69 0.40
recreational services
12. Plus indirect taxes less subsidies 5,495.31 6,515.65 5,729.34 6,863.02 8,086.67 4.91
Gross Domestic Product 105,378.35 119,545.75 132,140.72 149,151.78 164,627.92 100.00
Nominal GDP Growth Rate (%) 8.13 13.44 10.54 12.87 10.38
Source: National Accounts Statistics. Discrepancies in the figures are due to rounding.

Statistical Tables
TABLE 2. Gross Domestic Product in 2000 Prices

Ngultrum in Million
Year Growth:
2016 to
Sector 2013 2014 2015 2016 2017 2017 (%)
1. Agriculture, livestock and forestry 6,984.06 7,149.38 7,502.09 7,795.20 8,059.79 3.39
1.1 Crops 3,376.83 3,511.27 3,749.41 3,996.17 4,249.02 6.33
1.2 Livestock 2,006.01 2,052.41 2,111.32 2,246.31 2,345.45 4.41
1.3 Forestry and logging 1,601.21 1,585.69 1,641.35 1,552.73 1,465.32 -5.63
2. Mining and quarrying* 1,303.18 1,524.82 1,728.88 1,927.27 2,062.29 7.01
3. Manufacturing 4,670.71 5,098.82 5,323.89 5,452.90 5,752.99 5.50
4. Electricity and water 9,771.36 9,495.01 10,200.17 10,478.90 10,079.84 -3.81
5. Construction 7,474.56 7,963.34 8,807.57 10,009.13 10,644.07 6.34
6. Wholesale and retail trade 3,798.48 4,317.04 4,866.06 5,463.64 6,032.45 10.41
7. Hotels and restaurants 665.04 780.65 906.70 1,011.06 1,164.78 15.20
8. Transport, storage and communication 4,976.83 5,425.06 5,905.80 6,409.82 7,184.61 12.09
9. Financing, insurance and real estate 4,576.39 4,751.27 5,016.40 5,553.21 5,755.46 3.64
9.1 Finance 3,627.16 3,765.64 3,998.28 4,400.51 4,525.81 2.85
9.2 Real estate 908.27 942.38 973.87 1,094.41 1,106.59 1.11
9.3 Business services 40.97 43.26 44.26 58.29 123.06 111.12
10. Community, social and personal
5,519.38 5,885.01 6,275.95 6,797.76 6,767.94 -0.44
services
10.1 Public administration 3,339.28 3,574.51 4,178.07 4,621.39 4,641.93 0.44
10.2 Education and health 2,180.10 2,310.49 2,097.89 2,176.37 2,126.01 -2.31
11. Private social, personal and
211.21 214.78 221.13 229.49 277.08 20.74
recreational services
12. Plus indirect taxes less subsidies 2,655.25 3,023.75 2,570.56 2,955.97 3,269.58 10.61
Real GDP Growth Rate (%) 2.14 5.75 6.64 8.02 4.63

Table 3. Gross Domestic Product
by Expenditure at Current Prices
Ngultrum in million
Sectors Year Share of GDP
2013 2014 2015 2016 2017 in 2017 (%)
Investment 48,388.06 61,813.47 71,286.96 82,700.52 84,386.26 51.26

Private 36,390.20 51,848.17 59,298.45 63,062.63 61,332.33 37.26
Public 12,544.02 12,153.67 12,337.22 18,751.81 23,228.76 14.11
Change in stocks -546.17 -2,188.36 -348.70 886.08 -174.83 -0.11
Consumption 79,934.41 82,900.68 100,468.87 100,544.91 113,926.90 69.20
Private 61,659.96 62,706.64 77,003.33 75,483.52 86,867.04 52.77
Public 18,274.46 20,194.04 23,465.55 25,061.39 27,059.85 16.44
Net exports -22,988.64 -25,168.39 -39,615.12 -34,093.64 -33,685.24 20.46
Exports 42,636.41 43,376.76 43,896.30 40,891.01 47,893.47 29.09
Imports 65,625.05 68,545.15 83,511.42 74,984.65 81,578.71 49.55
GDP Growth Rate 8.13 13.49 10.54 12.87 10.38
Table 4 : Gross Domestic Product by

Economic Activity at Constant Prices
Ngultrum in million
Year Growth:
2016-2017
Sectors 2013 2014 2015 2016 2017 (%)
Investment 20,623.88 26,157.55 30,468.29 34,115.16 34,075.46 -0.12
Private 15,546.28 22,119.11 25,499.84 26,256.46 24,902.87 -5.26
Public 5,328.63 5,005.12 5,118.67 7,491.99 9,242.30 23.36
Change in stocks -251.03 -966.69 -150.23 366.71 -69.72 -119.01
Consumption 42,576.86 40,623.22 45,594.41 44,024.88 46,207.11 4.96
Private 33,836.11 31,675.47 35,680.17 33,692.89 35,422.64 5.13
Public 8,740.74 8,947.76 9,914.24 10,331.98 10,784.47 4.38
Net exports -10,995.56 -11,151.84 -16,737.47 -14,055.69 -13,231.67 5.86
Exports 20,393.16 19,219.77 18,546.28 16,858.02 18,812.72 11.60
Imports 31,388.72 30,371.60 35,283.75 30,913.70 32,044.39 3.66
GDP Growth Rate 1.36 6.56 6.64 8.02 4.63

Table 5: Consumer Price Index
Period
Item Weight 2013 2014 2015 2016 2017 2018
in
percent Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
%
Index
Food 39.9 209.61 104.86 109.64 114.46 115.51 117.69 120.32 121.26 121.09 121.12 122.94 124.60 124.87 125.61 127.92 131.12 133.33 135.23 137.04 139.99 142.42 142.50
non- 60.1 172.06 105.23 108.37 109.27 110.49 111.66 116.33 117.10 118.52 119.10 120.89 121.85 122.21 122.86 123.45 125.29 127.42 127.79 128.27 127.96 127.97 128.75
Food
Total 100.0 183.95 105.08 108.87 111.31 112.47 114.03 117.91 118.75 119.54 119.90 121.71 122.94 123.24 123.95 125.22 127.59 129.74 130.71 131.70 132.63 133.55 134.07
Percentage Change (y-o-y)

Food 39.9 7.86 2.81 9.41 14.46 13.26 12.33 9.95 5.96 4.83 2.92 2.18 2.75 2.91 3.54 3.88 5.06 6.82 7.66 7.13 6.76 6.82 5.37
Non-
food 60.1 8.66 7.14 8.89 9.27 7.02 6.11 7.35 7.17 7.27 6.66 3.92 4.06 3.11 3.16 2.12 2.83 4.26 4.01 3.90 2.13 0.44 0.75
Total 100.0 8.37 5.51 9.12 11.31 9.47 8.55 8.38 6.68 6.28 5.15 3.23 3.53 3.03 3.31 2.82 3.71 5.27 5.45 5.18 3.96 2.94 2.57
PPN 1.00 0.54 0.94 0.91 0.89 0.89 0.87 0.85 0.84 0.84 0.83 0.82 0.81 0.81 0.81 0.80 0.78 0.77 0.77 0.76 0.75 0.75 0.75
Source: National Statistics Bureau. 1) 2003 Household Income and Expenditure Survey; includes rent. 2) Base year used for PPN Q2, 2013 is of December 2012 and the figures represented is month-on-month. As of Q2, 2013 the NSB has
increased the weight of food in the CPI from 31.67% to 39.92%, and correspondingly decreased the weight for non-food from 68.33% to 60.08%.

107
Table 6: Domestic and imported inflation
Domestic Inflation
December 2012=100
Index Percent Change (%)
Weight in 2018 2018

Item
percent % Jan Feb Mar Apr May Jun Jan Feb Mar Apr May Jun
Food 17.77 145.54 146.02 146.16 145.66 145.79 144.45 6.25 5.03 8.53 4.04 4. 33 3.73
Non-food 30.24 130.39 130.57 130.57 130.68 130.68 130.67 0.13 0.11 0.10 0.17 0.17 0.16
Total 48.01 135.81 136.09 136.14 136.04 136.08 135.61 2.35 1.90 3.14 1.59 1.69 1.47
Imported inflation
December 2012=100
Index Percent Change (%)
Item Weight in 2018 2018
percent %
Jan Feb Mar Apr May Jun Jan Feb Mar Apr May Jun
Food 22.15 138.92 139.43 140.22 140.32 140.32 139.76 7.06 6.67 7.27 6.69 6.49 6.20
Non-food 29.84 125.32 125.51 125.51 126.21 126.94 127.30 1.04 0.81 0.46 1.09 1.32 1.63
Total 51.99 130.94 131.26 131.58 132.04 132.48 132.47 3.56 3.27 3.31 3.44 3.49 3.56
Source: National Statistics Bureau, Bhutan

Table 7: Annual and Monthly PPI and Inflation by Industry
Weights Index level (September 2011=100) Monthly Inflation (%) Annual Inflation (%)
Sectors
(%) Apr-17 May-17 Jun-17 Apr-18 May-18 Jun-18 Apr-18 May-18 Jun-18 Apr-18 May-18 Jun-18
All Industry 100.00 121.11 120.93 120.80 125.62 126.09 126.05 0.18 0.37 -0.04 3.73 4.27 4.35
Logging 0.72 134.79 134.79 134.79 134.79 134.79 134.79 0.00 0.00 0.00 0.00 0.00 0.00
Mining and quarrying 5.81 127.41 127.49 125.85 124.86 125.56 125.17 1.76 0.56 -0.31 -2.00 -1.51 -0.54
Manufacturing 47.66 120.74 120.35 120.28 131.67 132.48 132.42 0.14 0.62 -0.05 9.05 10.08 10.09
Electricity, gas, steam and air conditioning supply 35.35 123.80 123.80 123.80 123.80 123.80 123.80 0.00 0.00 0.00 0.00 0.00 0.00
Water supply; sewerage, waste management and remediation 0.08 109.39 109.39 109.39 109.39 109.39 109.39 0.00 0.00 0.00 0.00 0.00 0.00
activities
Transport 5.91 128.39 128.34 128.35 121.15 122.10 122.23 0.28 0.78 0.10 -5.64 -4.86 -4.77
Information and communication 4.47 89.76 89.76 89.76 89.57 89.57 89.57 0.00 0.00 0.00 -0.20 -0.20 -0.20
Source: National Statistics Bureau. (Note: An entry of “0.0” indicates a marginal value compared to “-” which indicates no value for that particular item)
Table 8: Annual and Monthly PPI Inflation by Product

Share Index level (September 2011=100) Monthly Inflation (%) Annual Inflation (%)
(%)
Description Apr-17 May-17 Jun-17 Apr-18 May-18 Jun-18 Apr-18 May-18 Jun-18 Apr-18 May-18 Jun-18
Statistical Tables
All Products 100.00 121.11 120.93 120.80 125.62 126.09 126.05 0.18 0.37 -0.04 3.73 4.27 4.35
Logging 0.72 134.79 134.79 134.79 134.79 134.79 134.79 0.00 0.00 0.00 0.00 0.00 0.00
Ores and minerals; electricity, gas and water 5.81 127.41 127.49 125.85 124.86 125.56 125.17 1.76 0.56 -0.31 -2.00 1.51 -0.54
Food products, beverages and tobacco; textiles, apparel and 3.56 112.63 112.38 112.44 113.46 113.39 113.39 -0.12 -0.06 0.00 0.74 0.90 0.85
leather products
Other transportable goods, except metal products, machinery 15.36 126.06 127.34 127.44 118.92 120.27 117.39 0.37 1.14 -2.39 -5.67 -5.55 -7.88
and equipment
Metal products, machinery and equipment 28.75 119.01 117.77 117.59 141.61 142.22 143.95 0.04 0.43 1.22 18.99 20.76 22.41
Distributive trade services; accommodation, food and beverage 41.34 124.42 124.41 124.41 123.39 123.53 123.55 0.04 0.11 0.01 -0.83 -0.71 -0.70
serving services; transport services; and electricity, gas and water

distribution services
Business and production services 4.47 89.76 89.76 89.76 89.57 89.57 89.57 0.00 0.00 0.00 -0.20 -0.20 -0.20
Source: National Statistics Bureau.
109
TABLE 9. Indian Wholesale
Price Index of all Commodities
2011-12 =100
Year
Period
2013 2014 2015 2016 2017 2018
Jan 108.00 113.60 110.80 108.00 112.60 115.80
Feb 108.40 113.60 109.60 107.10 113.00 116.10
Mar 108.60 114.30 109.90 107.70 113.20 116.30
Apr 108.60 114.10 110.20 109.00 113.20 117.30
May 108.60 114.80 111.40 110.40 112.90 117.90
Jun 110.10 115.20 111.80 111.70 112.70 119.10
Jul 111.20 116.70 111.10 111.80 113.90
Aug 112.90 117.20 110.00 111.20 114.80
Sep 114.30 116.40 109.90 111.40 114.30
Oct 114.60 115.60 110.10 111.50 115.50
Nov 114.30 114.10 109.90 111.90 116.40
Dec 113.40 112.10 109.40 111.70 115.70
Percentage change on the previous year
Jan 8.0 5.2 -2.5 -2.5 4.3 2.8
Feb 8.4 4.8 -3.5 -2.3 5.5 2.7
Mar 8.6 5.2 -3.8 -2.0 5.1 2.7
Apr 3.7 5.1 -3.4 -1.1 3.9 3.6
May 3.1 5.7 -3.0 -0.9 2.3 4.4
Jun 4.6 4.6 -3.0 -0.1 0.9 5.7
Jul 4.7 4.9 -4.8 0.6 1.9
Aug 5.6 3.8 -6.1 1.1 3.2
Sep 6.2 1.8 -5.6 1.4 2.6
Oct 6.7 0.9 -4.8 1.3 3.6
Nov 6.5 -0.2 -3.7 1.8 4.0
Dec 5.9 -1.1 -2.4 2.1 3.6
Source: Reserve Bank of India. Effective April 2011, the RBI has revised the base year from 2004-05
to 2011-12, creating a break in the continuity and comparison of data. The newly-calculated WPI
commences from the month of April 2011 onwards.

Statistical Tables
TABLE 10. Summary of Budgetary Operations
Ngultrum in Million
Item
2013/14 2014/15 2015/16 2016/17 2017/18 (r) 2018/19 (est.)
Revenue & Grants 37,819.12 36,231.05 42,039.30 42,673.13 54,666.72 40743.07
Domestic Revenue 23,244.61 25,141.03 28,033.81 29,713.60 36,178.37 35,855.00
Tax 16,182.77 18,387.34 19,884.63 21,707.00 26,173.13 26,150.96
Non-tax 7,061.84 6,753.69 8,149.19 8,006.60 10,005.25 9,704.04
Other Receipts (Net) 338.16 1,135.00 -884.13 -7.23 1,055.27 0.00
Grants 14,236.35 9,955.02 14,889.61 12,986.75 17,433.08 4,888.07
GOI 10,684.43 6,593.76 10,721.70 9,882.57 13,781.13 2,117.52
Others 3,551.92 3,361.26 4,167.91 3,104.18 3,651.95 2,770.54
Program 1,749.69 2,125.00 2,340.02 2,125.00 1,700.00 150.00
GOI 1,625.00 2,125.00 1,275.00 2,125.00 1,700.00 0.00
Others 124.69 0.00 1,065.02 0.00 0.00 150.00
Project tied 12,486.66 7,830.02 12,549.60 10,861.75 15,733.08 4,738.07
GOI 9,059.43 4,468.76 9,446.70 7,757.57 12,081.13 2,117.52
Others 3,427.23 3,361.26 3,102.90 3,104.18 3,651.95 2,620.54
Outlay 33,522.83 34,334.26 43,603.00 48,017.99 56,513.50 38,307.49
Total expenditure 34,609.90 36,475.85 44,688.45 49,966.61 58,607.28 39,847.47
Current 17,941.15 21,032.04 22,880.59 24,129.59 28,616.64 29,075.17
Capital 16,668.75 15,443.80 21,807.86 25,837.02 29,990.64 10,772.30
Net Lending -1,331.99 -2,552.75 -1,885.33 -2,003.12 -2,093.78 -1,539.97
Advances/Suspense (Net) 244.92 411.16 799.88 54.50 0.00 0.00
Overall Balance 4,296.29 1,896.79 -1,563.70 -5,344.86 -1,846.78 2,435.57
Financing -4,296.29 -1,896.79 1,563.70 5,344.86 1,846.78 -2,435.57
Net Borrowing -1,042.31 -1,086.41 -1,215.48 524.33 203.21 -2,435.57
Borrowing 1,534.54 1,685.27 1,818.68 3,227.66 3,023.53 1,248.76
External 1,534.54 1,685.27 1,818.68 3,227.66 1,073.53 1,248.76
Internal 0.00 0.00 0.00 0.00 1,950.00 0.00
Repayment 2,576.86 2,771.68 3,034.16 2,703.34 2,820.32 3,684.34
External 2,401.55 2,596.37 2,850.33 2,694.14 2,810.41 2,016.09
Internal 175.30 175.30 183.83 9.19 9.91 1,668.25
Resource Gap 3,253.98 810.39 -2,779.19 -4,820.54 -1,643.57 0.00
Source: National Budget Report FY 2018-19 and Annual Financial Statements FY 2016-17, Ministry of Finance. Figures
may not add up due to rounding.

Table 11: Monetary Survey1
Ngultrum in Million
2013/14 2014/15 2015/16 2016/17 2017/18
Broad Money (M2) 63,387.80 68,344.29 79,162.74 104,113.59 114,973.69
Narrow Money (M1) 39,701.84 41,675.50 44,933.63 60,723.28 66,295.05
Currency Outside Banks 5,704.58 5,946.06 6,101.73 8,787.66 9,234.04
Transferable Deposits 33,997.26 35,729.44 38,831.90 51,935.62 57,061.00
Current Deposits 17,670.73 16,831.69 17,570.69 24,952.19 25,465.20
Saving Deposits 16,326.54 18,897.75 21,261.22 26,983.43 31,595.81
Other Deposits 23,685.96 26,668.79 34,229.10 43,390.31 48,678.64
Time Deposits 21,952.33 25,446.51 32,640.45 41,285.46 46,163.85
Foreign Currency Deposits 1,733.63 1,222.28 1,588.65 2,104.85 2,514.79
Sources of Broad Money
Foreign Assets (Net) 53,886.46 58,248.74 67,815.59 68,186.68 66,006.28
Indian Rupee 265.22 4,034.37 7,316.83 18,236.56 6,423.31
Convertible Foreign Currency 53,621.24 54,214.37 60,498.75 49,950.12 59,582.97
Net Domestic Assets 9,501.34 10,095.56 11,347.15 35,926.92 48,967.41
Domestic Credit 52,299.01 56,255.12 65,692.70 85,084.84 100,320.53
Claims on Government -1,978.01 -7,739.70 -5,570.48 2,852.93 5,029.42
Claims on Other Public Sector 2 4,438.35 7,174.29 6,106.02 7,046.82 8,306.02
Claims on Private Sector 49,838.67 56,820.54 65,157.15 75,185.09 86,985.09
Other Items Net 3 42,797.67 46,159.57 54,345.54 49,447.26 51,353.12
Percent Change (y-o-y)
Broad Money (M2) 6.62 7.82 15.83 31.52 10.43
Narrow Money (M1) 5.05 4.97 7.82 35.14 9.18
Currency Outside Banks 0.41 4.23 2.62 44.02 5.08
Transferable Deposits 5.87 5.10 8.68 33.74 9.87
Current Deposits -6.88 -4.75 4.39 42.01 2.06
Saving Deposits 24.28 15.75 12.51 26.91 17.09
Other Deposits 9.37 12.59 28.35 26.76 12.19
Time deposits 7.75 15.92 28.27 26.49 11.82
Foreign Currency Deposits 35.07 -29.50 29.97 32.49 19.48
Foreign Assets (Net) 10.95 8.10 16.42 0.55 -3.20
Indian Rupee -82.23 1421.14 81.36 149.24 -64.78
Convertible Foreign Currency 13.91 1.11 11.59 -17.44 19.28
Domestic Assets -12.71 6.25 12.40 216.62 36.30
Domestic Credit 6.50 7.56 16.78 29.52 17.91
Claims on Government -159.52 291.29 -28.03 -151.22 76.29
Claims on Other Public Sector 94.27 61.64 -14.89 15.41 17.87
Claims on Private Sector 6.44 14.01 14.67 15.39 15.69
Other Items Net 3.01 7.86 17.73 -9.01 3.85
1. Excludes figures from non-banks. 2. Claims on Other Public Sectors includes claims on Government Corporations
and Public Corporations. 3. Other Items (Net) includes money market instruments. 4. Source: RMA and Commercial
Banks.
Note: An entry of “0.0” indicates a marginal value compared to “-” which indicate no value for the particular item

Statistical Tables
Table 12: Royal Monetary Authority Survey

Ngultrum in Million
2013/14 2014/15 2015/16 2016/17 2017/18
Assets
Foreign Assets 60,575.31 62,112.52 77,976.85 71,820.66 75,193.96
Indian Rupee 9,493.07 9,826.55 19,017.73 23,496.07 18,614.44
Claims on DMBs 281.55 1,696.88 266.59 578.36 709.32
Claims on Government 0.00 0.00 0.00 0.00 0.00
Claims on NBFIs 0.00 0.00 0.00 0.00 0.00
Govt. securities 0.00 0.00 0.00 0.00 0.00
Liabilities
Reserve Money 26,638.21 26,248.81 27,802.92 34,327.86 33,469.76
o/w Currency Outside Banks 5,704.58 5,946.06 6,101.73 8,787.66 9,234.04
Foreign liabilities 10,000.00 7,000.00 13,804.08 7,000.00 13,776.26
Indian Rupee 10,000.00 7,000.00 13,804.08 7,000.00 13,776.26
Convertable foreign currency 0.00 0.00 0.00 0.00 0.00
Government Deposits 3854.84 7779.70 10200.06 7152.22 3020.41
RMA Bills outstanding 0.00 0.00 0.00 0.00 0.00
Capital Accounts 3,013.60 3,597.10 3,686.83 3,951.51 4,357.71
Other Items (Net) 17,363.80 19,212.12 22,782.87 20,003.76 21,311.12
Foreign Assets 8.82 2.54 25.54 -7.89 4.70
Indian Rupee -11.33 3.51 93.53 23.55 -20.78
Convertible Foreign Currency 13.62 2.36 12.76 -18.04 17.08
Reserve Money 11.00 -1.46 5.92 23.47 -2.50
Foreign liabilities -0.32 -30.00 97.20 -49.29 96.80
Other Items Net 1 -22.24 10.64 18.59 -12.20 6.54
1. Other Items (Net) includes money market instruments. 2. Source: RMA and Commercial Banks. Note: An entry of
“0.0” indicates a marginal value compared to “-” which indicate no value for the particular item

Table 13. Deposit Money Banks Survey
Ngultrum in Million
2013/14 2014/15 2015/16 2016/17 2017/18
Assets
Reserves 21,088.03 19,549.26 17,852.87 25,197.82 23,752.50
Foreign Assets 3,311.16 3,136.21 3,642.82 3,655.35 5,356.82
Indian Rupee 772.15 1,207.82 2,103.18 1,740.48 1,585.13
Claims on Government 1,876.83 40.00 4,629.58 10,005.15 8,049.83
Claims on Other Public Sector 1
4,438.35 7,174.29 6,106.02 7,046.82 8,306.02
Claims on Private Sector 2
49,825.07 56,792.21 65,123.84 75,148.76 86,953.11
Capital Accounts 15,117.20 16,713.71 18,029.27 16,915.42 18,019.31
Other Items Net 3
6,602.13 6,683.62 5,561.65 8,253.50 7,727.31
Liabilities
Demand Depsoits 33,997.26 35,729.44 38,831.90 51,935.62 57,061.00
Current Deposits 17,670.73 16,831.69 17,570.69 24,952.19 25,465.20
Saving Deposits 16,326.54 18,897.75 21,261.22 26,983.43 31,595.81
Time Deposits 21,952.33 25,446.51 32,640.45 41,285.46 46,163.85
Foreign Currency Deposits 1,733.63 1,222.28 1,588.65 2,104.85 2,514.79
Reserves 18.59 -7.30 -8.68 41.14 -5.74
Foreign Assets 12.90 -5.28 16.15 0.34 46.55
Claims on Other Public Sector 94.27 61.64 -14.89 15.41 17.87
Capital Accounts 16.19 10.56 7.87 -6.18 6.53
Other Items Net 73.07 1.23 -16.79 48.40 -6.38
Demand Depsoits 5.87 5.10 8.68 33.74 9.87
Current Deposits -6.88 -4.75 4.39 42.01 2.06
Saving Deposits 24.28 15.75 12.51 26.91 17.09
Time Deposits 7.75 15.92 28.27 26.49 11.82
Foreign Currency Deposits 35.07 -29.50 29.97 32.49 19.48
1. Claims on Other Public Sectors includes claims on Government Corporations and Public Corporations 2. Claims
on Private Sectors includes Claims on NBFIs. 3. Other Items (Net) includes money market instruments. 4. Source:
RMA and Commercial Banks
Note: An entry of “0.0” indicates a marginal value compared to “-” which indicate no value for the particular item

Statistical Tables
TABLE 14. Financial Sector

Investment by Economic Activity
Millions of Nu.
Economic Sector/Source 2013/14 2014/15 2015/16 2016/17 2017/18
Agriculture 2,287.09 3,487.37 4,457.86 5,069.48 5,632.90
Bank of Bhutan 0.30 17.46 30.59 41.52 100.72
Bhutan National Bank 0.76 0.71 0.73 0.71 13.00
Bhutan Development Bank Limited 2,283.73 3,467.05 4,413.97 5,003.62 5,508.05
TBank Limited 1.51 1.52 1.43 0.39 0.00
Druk PNB Bank Limited 0.78 0.64 10.18 15.72 2.48
Royal Insurance Corporation of Bhutan 0.00 0.00 0.00 3.40 4.07
Bhutan Insurance Limited 0.00 0.00 0.96 4.12 4.58
Service and Tourism 9,896.11 12,402.70 11,323.89 20,017.94 24,844.15
Bank of Bhutan 4,362.83 5,570.79 3,163.48 5,648.65 8,463.88
Bhutan National Bank 2,606.74 3,171.62 3,636.83 4,476.84 4,706.49
TBank Limited 245.26 328.72 479.43 440.54 559.76
Druk PNB Bank Limited 655.87 916.10 896.46 1,505.02 2,139.92
Royal Insurance Corporation of Bhutan 183.03 325.21 706.10 4,924.60 5,980.03
Manufacturing 9,915.87 10,088.94 10,433.67 12,767.13 13,416.74
Bank of Bhutan 3,184.24 3,522.69 3,485.91 3,724.18 3,944.25
Bhutan Development Bank Limited 780.29 858.23 816.09 830.68 1,038.18
TBank Limited 217.03 199.50 182.32 197.68 257.91
Druk PNB Bank Limited 522.45 651.85 740.24 1,453.97 1,525.68
Royal Insurance Corporation of Bhutan 972.98 1,270.83 1,479.79 1,939.60 2,046.18
Building & Construction 15,785.01 17,371.53 19,244.02 21,704.88 25,405.83
Bank of Bhutan 5,317.37 5,370.00 5,263.38 6,032.53 7,873.24
TBank Limited 480.86 465.67 500.88 1,329.41 1,909.95
Druk PNB Bank Limited 933.28 1,067.94 1,340.56 1,532.29 1,703.80
Royal Insurance Corporation of Bhutan 2,047.24 2,387.62 2,911.52 2,811.91 2,638.77
Trade & Commerce 8,703.66 11,250.20 17,621.37 13,285.10 15,044.08
Bank of Bhutan 970.57 1,277.25 1,736.84 1,320.83 1,985.13
Bhutan Development Bank Limited 945.23 1,246.47 1,552.85 1,637.12 1,587.69
TBank Limited 471.49 495.55 453.99 785.07 761.44

Transport (Heavy + Light) 3,758.69 2,617.82 4,816.25 5,003.48 6,884.77
Bank of Bhutan 747.12 522.73 875.74 1,008.86 1,841.84
Bhutan National Bank 793.23 696.40 1,041.49 1,334.38 1,753.39
Bhutan Development Bank Limited 202.31 432.07 1,120.60 1,193.53 1,144.87
TBank Limited 246.37 189.31 116.98 251.21 222.31
Personal Loans 11,991.02 11,750.89 11,818.30 13,636.56 12,894.64
Bank of Bhutan 5,724.07 5,479.55 5,597.03 5,463.27 5,480.13
TBank Limited 316.22 510.51 504.19 914.74 1,057.57
Loan Against Shares 640.48 667.28 402.84 432.73 214.24
Bank of Bhutan 118.83 171.58 6.67 32.83 0.06
Bhutan Development Bank Limited 0.00 0.00 98.40 0.00 0.00
TBank Limited 14.27 11.44 5.72 138.83 37.07
Government (Short term loans) 0.00 0.00 4,605.47 515.19 445.30
Bank of Bhutan 0.00 0.00 4,605.47 0.00 0.00
TBank Limited 0.00 0.00 0.00 0.00 0.00
Credit Card 7.18 8.77 11.27 10.42 15.85
Bank of Bhutan 2.50 3.58 5.34 6.00 12.82
TBank Limited 0.00 0.00 0.00 0.00 0.00
Others 1 1,280.24 1,863.52 2,150.54 2,615.72 3,592.74
Bank of Bhutan 330.69 319.48 362.22 668.33 857.67
TBank Limited 195.97 344.24 310.46 379.12 791.54
Total 64,265.35 71,509.01 86,885.47 95,058.63 108,791.26
1. Other includes staff loans, EDP and SBAS 2. Source: RMA and Commercial Banks. Note: An entry of “0.0” indicates a
marginal value compared to “-” which indicate no value for the particular item

Statistical Tables
Table 15. Deposits Base of

Commercial Banks by Sectors
Ngultrum in Million
Item 2013/14 2014/15 2015/16 2016/17 2017/18
Total Deposits 57,683.20 62,398.20 73,061.00 95,325.90 105,739.60
Individuals 33,070.10 35,929.40 46,976.40 65,663.90 73,851.60
Govt. Corps. 8,480.70 7,684.40 8,746.70 8,716.40 10,901.50

Govt.
Others 16,132.30 18,784.30 17,337.90 20,945.70 20,986.60
Demand deposits 33,997.30 35,729.40 38,831.90 51,935.60 57,061.00
Individuals 24,050.10 24,608.70 29,482.10 47,724.00 51,135.00
Govt. Corps. 4,369.70 3,111.70 3,724.00 920.90 1,352.40
Others 5,577.40 8,009.00 5,625.70 3,290.8 0 4,573.70
Time Deposits 23,686.00 26,668.80 34,229.10 43,390.30 48,678.60
Individuals 9,020.00 11,320.70 17,494.25 17,939.88 22,716.60
Govt. Corps. 4,111.00 4,572.80 5,022.64 7,795.54 9,549.10
Others 10,554.90 10,775.30 11,712.22 17,654.90 16,412.90
% of total deposits
Individuals 57.3 57.6 64.3 68.9 69.8
Govt. Corps. 14.7 12.3 12.0 9.1 10.3
Others 28.0 30.1 23.7 22.0 19.8
Demand deposits 58.9 57.3 53.1 54.5 54.0
Individuals 41.7 39.4 40.4 50.1 48.4
Govt. Corps. 7.6 5.0 5.1 1.0 1.3
Others 9.7 12.8 7.7 3.5 4.3
Time Deposits 41.1 42.7 46.9 45.5 46.0
Individuals 15.6 18.1 23.9 18.8 21.5
Govt. Corps. 7.1 7.3 6.9 8.2 9.0
Others 18.3 17.3 16.0 18.5 15.5
Source: Commercial Banks. Note: An entry of “0.0” indicates a marginal value compared to “-” which indicate no
value for the particular item

TABLE 16. Annual Overall Balance of Payments Estimates
Ngultrum in Million
2017/18
Item 2013/14 2014/15 2015/16 2016/17
(p)
A. CURRENT ACCOUNT -30,116.10 -34,177.40 -41,436.09 -36,142.83 -31,306.95
Goods and Services -28,168.49 -30,970.32 -39,604.39 -34,560.70 -30,310.35
Goods: Net (Trade Balance) -24,170.51 -26,662.76 -35,519.11 -31,149.17 -26,959.11
Exports (fob) 32,876.57 35,982.17 32,789.32 36,872.02 38,859.25
Imports (fob) 57,047.07 62,644.93 68,308.43 68,021.19 65,818.35
Services -3,997.99 -4,307.56 -4,085.28 -3,411.53 -3,351.24
Credit 7,646.23 7,784.24 9,659.81 10,469.87 11,921.05
Debit 11,644.22 12,091.80 13,745.09 13,881.40 15,272.29
Primary Income -7,859.65 -8,250.49 -11,385.40 -13,211.01 -14,187.50
Credit 1,192.43 2,575.68 1,623.07 1,998.95 2,133.11
Debit 9,052.09 10,826.17 13,008.47 15,209.96 16,320.60
Secondary Income 5,912.05 5,043.42 9,553.70 11,628.88 13,190.90
Credit 7,333.36 6,874.16 11,358.47 13,256.53 15,019.13
o.w. Budgetary grants 3,856.53 4,785.01 8,373.35 6,415.85 6,204.86
Debit 1,421.31 1,830.74 1,804.76 1,627.65 1,828.24
B. CAPITAL ACCOUNT 16,901.74 13,981.04 12,668.05 12,391.57 11,884.00
o.w. Budgetary grants for investment * 7,541.54 4,408.03 6,114.55 3,532.33 7,348.03
C. FINANCIAL ACCOUNT ** -14,315.68 -21,130.69 -43,297.11 -15,763.23 -27,703.60
Direct Investment in Bhutan: net incurrence 1,427.39 394.85 788.41 -1,601.51 218.99
of liabilities
o.w. Equity capital 1,413.89 306.66 677.77 -521.08 255.16
Other Investment -12,888.29 -20,735.84 -42,508.70 -17,364.73 -27,484.64
Net acquisition of financial assets -327.54 -820.49 1,450.83 734.24 1,078.70
Net incurrence of financial liabilities 12,560.75 19,915.35 43,959.52 18,098.97 28,563.33
o.w. RGOB loans *** 15,331.40 17,838.32 30,052.75 13,078.38 6,079.24
o.w. Other loans -3,125.50 1,990.28 14,050.35 3,682.33 20,657.83
D. Net Errors & Omissions 3,179.18 -1,505.16 -1,944.53 6,422.74 -3,415.40
E. Overall Balance 4,280.49 -570.83 12,584.54 -1,565.30 4,865.20
F. Reserve Assets 4,280.49 -570.83 12,584.54 -1,565.30 4,865.20
* Segregation of budgetary grants into Secondary Income and Capital Transfers carried out from FY 2006/07 onwards.
** Net acquisition of financial assets minus net incurrence of financial liabilities; (+) figure denotes net lending and
(-) figure denotes net borrowing; excludes reserve assets. Financial Account sign convention: (+) = increase in assets
or liabilities; (-) = decrease in assets or liabilities. *** Includes hydropower loans & accrued interest. BoP statistics
were revised from 2013/14 to include improvements in data coverage and classifications.

Statistical Tables
TABLE 17. Annual Balance of Payments Estimates with India
Ngultrum in Million
2017/18
Item 2013/14 2014/15 2015/16 2016/17
(provisional)
A. CURRENT ACCOUNT -25,594.89 -28,684.94 -38,312.61 -34,006.52 -34,479.42
Exports (fob) 29,908.13 31,946.83 29,870.13 32,637.08 31,465.85
Imports (fob) 47,270.58 50,909.96 58,748.55 56,940.84 56,612.49
Services -4,124.51 -4,060.68 -4,600.10 -3,801.67 -2,284.60
Credit 1,428.88 1,212.99 2,940.35 2,887.24 4,742.04
Debit 5,553.39 5,273.67 7,540.45 6,688.91 7,026.63
Primary Income -7,507.50 -8,256.43 -10,878.33 -12,798.71 -13,803.18
Credit 390.33 1,362.17 817.45 1,157.21 1,046.51
Debit 7,897.83 9,618.60 11,695.79 13,955.92 14,849.69
o.w. Interest on hydropower loans * 1,445.41 1,445.41 1,344.56 1,243.71 1,325.22
Credit 4,473.91 4,022.32 7,399.71 8,179.76 7,840.36
Debit 1,074.35 1,427.02 1,355.47 1,282.13 1,085.37
B. CAPITAL ACCOUNT 16,417.86 13,650.46 12,122.05 12,337.75 11,8628.20
o.w. Budgetary grants for investment ** 7,057.66 4,077.45 5,568.55 3,478.50 7,326.19
o.w. Grants for hydro power 9,360.20 9,573.01 6,553.50 8,859.24 4,536.00
C. FINANCIAL ACCOUNT *** -11,202.87 -18,874.12 -40,782.09 -12,777.02 -25,628.49
Direct Investment in Bhutan: net incurrence 93.84 -152.24 337.16 63.66 14.17
of liabilities
o.w. Equity capital 150.84 -146.97 313.02 0.00 1.94
Net acquisition of financial assets -680.27 -21.73 1,310.37 481.31 -494.47
Net incurrence of financial liabilities 10,428.75 19,004.62 41,755.30 13,194.67 25,119.85
o.w. Hydro power loans (incl. accrued 12,742.01 16,600.36 28,574.07 10,093.09 3,600.00
interest)*
o.w. Other loans -2,178.23 2,059.89 13,443.85 2,840.26 21,194.48
D. Net Errors & Omissions -3,244.80 -3,104.54 -4,648.04 8,269.28 -4,762.80
E. Overall Balance -1,218.96 735.10 9,943.50 -622.47 -1,751.50
F. Reserve Assets -1,218.96 735.10 9,943.50 -622.47 -1,751.50
* Includes accrued interest (from FY 2006/07 onwards), and are therefore not comparable with figures published by
the Ministry of Finance. ** Segregation of budgetary grants into Secondary Income and Capital Transfers carried
out from FY 2006/07 onwards. *** Net acquisition of financial assets minus net incurrence of financial liabilities;
(+) figure denotes net lending and (-) figure denotes net borrowing; Excludes reserve assets. Financial Account sign
convention: (+) = increase in assets or liabilities; (-) = decrease in assets or liabilities. BoP statistics were revised
from 2013/14 onwards to include improvements in data coverage & classifications.

TABLE 18. Annual Balance of Payments
Estimates with Countries Other Than India (COTI)
Ngultrum in Million
2017/18
Item 2013/14 2014/15 2015/16 2016/17
(provisional)
A. CURRENT ACCOUNT -4,521.21 -5,492.46 -3,123.47 -2,136.31 3,172.47
Exports (fob) 2,968.44 4,035.34 2,919.19 4,234.95 7,393.40
Imports (fob) 9,776.49 11,734.97 9,559.88 11,080.35 9,205.86
Services 126.52 -246.88 514.82 390.14 -1,066.65
Credit 6,217.35 6,571.25 6,719.46 7,582.63 7,179.01
Debit 6,090.83 6,818.13 6,204.64 7,192.49 8,245.66
Primary Income -352.15 5.94 -507.06 -412.30 -384.32
Credit 802.10 1,213.51 805.62 841.74 1,086.59
Debit 1,154.26 1,207.57 1,312.68 1,254.04 1,470.91
Credit 2,859.44 2,851.83 3,958.75 5,076.78 7,178.77
Debit 346.96 403.71 449.29 345.52 742.87
B. CAPITAL ACCOUNT 483.88 330.58 546.00 53.83 21.84
o.w. Budgetary grants for investment * 483.88 330.58 546.00 53.83 21.84
C. FINANCIAL ACCOUNT ** -3,112.81 -2,256.57 -2,515.02 -2,986.20 -2,075.07
Direct Investment: net incurrence of liabilities 1,333.55 547.09 451.25 -1,665.17 204.75
o.w. Equity capital 1,263.05 453.63 364.75 -521.08 257.16
Net acquisition of financial assets *** 352.74 -798.76 140.45 252.92 1,573.16
Net incurrence of financial liabilities 2,132.00 910.72 2,204.22 4,904.30 3,443.48
o.w. RGOB loans 2,589.39 1,237.96 1,478.68 2,985.28 2,479.24
o.w. Other loans -947.26 -69.61 606.50 842.08 -536.65
D. Net Errors & Omissions 6,423.98 1,599.38 2,703.50 -1,846.55 1,347.35
E. Overall Balance 5,499.46 -1,305.93 2,641.05 -942.83 6,616.73
F. Reserve Assets 5,499.46 -1,305.93 2,641.05 -942.83 6,616.73
* Segregation of budgetary grants into Secondary Income and Capital Transfers carried out from FY 2006/07 onwards.
** Net acquisition of financial assets minus net incurrence of financial liabilities; (+) figure denotes net lending
and (-) figure denotes net borrowing; excludes reserve assets. Financial Account sign convention: (+) = increase
in assets or liabilities; (-) = decrease in assets or liabilities. *** Data on net acquisition of financial assets were
compiled from FY 2007/08 onwards. BoP statistics were revised from 2013/14 onwards to include data improvements
in coverage and classification.

Statistical Tables
Table :19 Composition of Imports

from Countries Other Than India (COTI)
Ngultrum in Million
SI % Share Annual %
IMPORT CATEGORY 2013 2014 2015 2016 2017
in Total change
1 Live Animals & Animal
49.47 69.45 92.12 107.45 109.67 0.84 2.07
Products
2 Vegetables, Fruits, Nuts,
Coffee, Tea, Spices, Cereals, 65.70 50.25 111.95 83.98 85.82 0.66 2.19
Grains & Seeds
3 Animal or Vegetable Fats &
1.91 10.78 14.26 8.92 2.76 0.02 -69.09
Oils
3.1 Palm Oil (Crude & Other) - 10.31 11.90 7.19 0.00 0.00 -99.99
4 Processed Foods & Beverages 262.61 334.93 493.92 482.23 618.49 4.75 28.26
5 Mineral Products inc. oils &
151.54 237.74 120.60 351.77 99.22 0.76 -71.79
fuels
6 Products of Chemical & Allied
905.61 740.91 700.66 427.25 456.77 3.51 6.91
Industries
6.1 Medicines / Pharmaceutical
458.12 270.86 309.14 50.86 96.24 0.74 89.23
Products
6.2 Photographic /
1.93 14.85 11.56 0.80 10.97 0.08 1,270.96
Cinematographic goods
7 Plastic & Rubber Products 694.29 863.85 905.96 832.16 758.39 5.82 -8.87
8 Wood and Wood Products 18.38 23.73 21.29 27.99 27.56 0.21 -1.51
9 Wood Pulp Products 271.57 83.39 187.41 173.05 123.32 0.95 -28.73
10 Textiles, Footwear & Hats/
273.16 195.85 208.95 280.37 305.42 2.35 8.94
Headgear
11 Articles of Stone, Plaster,
Cement, Asbestos, Ceramics 56.06 57.82 57.46 68.23 76.77 0.59 12.52
& Glass
11.1 Ceramic Products 15.17 21.98 16.50 17.28 33.62 0.26 94.54
12 Pearls and Products of
Precious/Semi-precious Metal 70.87 8.84 14.20 39.53 41.58 0.32 5.17
& Stones
13 Base Metals and Articles of
794.70 1,494.43 978.93 856.82 838.92 6.44 -2.09
Base Metal
14 Machinery, Mechanical/
Electrical Appliances & 4,755.91 3,894.79 4,607.76 6,021.01 7,887.08 60.56 30.99
Equipment and Parts
14.1 Magnetic Discs & Media
14.49 128.52 387.84 199.41 339.17 2.60 70.09
(recorded/unrecorded)
15 Transport Vehicles & Aircraft
467.37 502.71 5,199.76 1,612.95 996.39 7.65 -38.23
and Engines & Parts
16 Optical, Photographic,
Cinematographic & 340.44 242.16 349.62 478.29 357.47 2.74 -25.26
Measuring Equipment
17 Handicrafts, Works of Art,
Collectors’ Pieces & Personal 3.26 0.97 8.50 7.81 0.86 0.01 -89.00
Effects
18 Miscellaneous Manufactured
200.77 224.32 223.47 215.31 236.94 1.82 10.05
Products
TOTAL 9,383.63 9,036.92 14,296.82 12,075.13 13,023.45 100.00 7.85

Table : 20 Composition of Exports
to Countries Other Than India (COTI)
Ngultrum in Million
% Share Annual %
SI EXPORT CATEGORY 2013 2014 2015 2016 2017
in Total change
1 Vegetables, Fruits, Tea,
Spices, Cereals, Grains & 1,185.96 1,387.46 1,284.80 1,342.87 1,259.40 22.18 -6.22
Animal Products
1.1 Oranges 489.01 520.11 446.55 425.60 470.75 8.29 10.61
1.2 Apples 51.40 59.10 61.43 39.72 21.93 0.39 -44.79
1.3 Cardamoms 365.63 421.42 565.41 708.53 552.61 9.73 -22.01
2 Processed Foods &
41.01 43.50 24.93 19.81 5.25 0.09 -73.49
Beverages
3 Mineral Products inc. oils
583.30 770.46 713.81 1,205.96 2,218.96 39.07 84.00
& fuels
3.1 Limestone & other
307.07 348.31 338.08 169.44 319.02 5.62 88.28
calcereous stone
3.2 Dolomite 141.46 169.67 520.30 205.60 241.60 4.25 17.51
3.3 Bituminous Coal 29.37 74.99 - - 5.00 0.09 -
4 Products of Chemical &
23.72 34.08 645.16 263.60 134.10 2.36 -49.13
Allied Industries
5 Plastic & Rubber Products 0.09 0.01 0.02 2.28 0.01 0.00 -99.74
6 Wood and Wood Products 1.35 0.97 0.77 3.87 0.36 0.01 -90.60
7 Wood Pulp Products 0.65 0.00 0.09 1.11 0.41 0.01 -63.01
8 Textiles, Footwear & Hats/
0.79 0.54 4.70 2.90 2.01 0.04 -30.60
Headgear
9 Articles of Stone, Plaster,
Cement, Asbestos, 0.44 0.38 2.33 5.26 0.64 0.01 -87.78
Ceramics & Glass
10 Articles of Precious/Semi-
0.00 - 0.00 - - - -
precious Metals
11 Base Metals and Articles of
1,034.02 1,541.02 745.11 353.19 2,054.12 36.17 481.60
Base Metal
12 Machinery, Mechanical
& Electrical Appliances,
0.21 - - 0.02 - - -100.00
Equipment & Parts &
Aircraft Parts
12.1 Recorded or Unrecorded
media (discs, tapes, - - - - - - -
smart cards)
13 Handicrafts, Works of
Art, Philatelic Products & 1.51 3.96 4.60 1.64 3.41 0.06 107.42
Personal Effects
14 Miscellaneous
0.73 1.16 1.64 3.19 0.47 0.01 -85.31
Manufactured Products
TOTAL 2,873.79 3,783.55 3,427.96 3,205.70 5,679.14 100.00 77.16
Source: Bhutan Trade Statistics, Department of Revenue & Customs. (Note: An entry of “0.0” indicates a marginal value
compared to “-” which indicates no value for that particular item.)

Statistical Tables
TABLE 21. Composition of Imports from India
Ngultrum in Million
% Share Annual %
Sl IMPORT CATEGORY 2013 2014 2015 2016 2017
in Total change
1 Live Animals & Animal Products 2,331.06 2,674.73 2,755.49 2,713.71 2,690.20 4.98 -0.87
2 Vegetables, Fruits, Nuts, Coffee,
Tea, Spices, Cereals, Grains & 3,260.87 3,551.30 3,412.86 3,756.99 3,738.06 6.93 -0.50
Seeds
3 Animal or Vegetable Fats & Oils 978.43 1,005.55 976.01 1,032.24 1,129.42 2.09 9.41
4 Processed Foods & Beverages 1,812.37 2,024.26 2,159.53 2,306.03 2,375.86 4.40 3.03
5 Mineral Products inc. oils & fuels 12,848.24 13,329.63 12,341.91 12,423.94 13,963.50 25.87 12.39
6 Electricity 222.92 319.02 249.65 172.95 74.94 0.14 -56.67
7 Products of Chemical & Allied 1,885.03 1,954.89 2,098.72 2,129.60 2,098.01 3.89 -1.48
Industries
7.1 Medicine / Pharmaceutical 200.31 173.54 338.18 297.15 262.46 0.49 -11.67
Products
8 Plastic & Rubber Products 1,627.85 1,727.67 1,793.07 1,807.81 2,105.70 3.90 16.48
9 Wood and Wood pulp products 1,911.86 2,349.58 2,391.06 1,868.29 2,330.12 4.32 24.72
9.1 Wood and Wood Products 1,200.04 1,611.34 1,683.13 1,183.67 1,585.37 2.94 33.94
9.2 Wood Pulp Products 711.82 738.24 707.93 684.63 744.75 1.38 8.78
10 Textiles, Footwear & Hats/ 738.56 835.44 925.18 826.70 874.26 1.62 5.75
Headgear
11 Articles of Stone, Plaster, Cement, 925.99 803.45 899.08 905.06 1,111.27 2.06 22.78
Asbestos, Ceramics & Glass
11.1 Ceramic Products 340.90 254.02 320.14 316.16 329.26 0.61 4.14
12 Pearls and Products of Precious/ 16.16 1.07 0.90 0.28 0.79 0.00 182.99
Semi-precious Metal & Stones
13 Base Metals and Articles of Base 7,535.04 8,407.03 9,257.00 6,298.39 6,876.47 12.74 9.18
Metal
14 Machinery, Mechanical/Electrical 6,550.70 6,604.79 9,282.39 12,197.97 9,302.14 17.23 -23.74
Appliances & Equipment and Parts
14.1 Magnetic Discs & Media 19.20 16.21 21.79 13.97 19.36 0.04 38.52
(recorded/unrecorded)
15 Transport Vehicles & Aircraft and 625.45 1,623.92 4,319.48 5,758.68 4,268.65 7.91 -25.87
Engines & Parts
16 Optical, Photographic, 256.33 227.22 300.77 497.22 449.81 0.83 -9.53
Cinematographic & Measuring
Equipment
17 Handicrafts, Works of Art, 0.03 1.84 0.38 0.04 0.02 0.00 -33.06
Collectors’ Pieces & Personal
Effects
18 Miscellaneous Manufactured 362.49 406.23 577.04 588.83 583.45 1.08 -0.91
Products
TOTAL 43,889.37 47,847.62 53,740.51 55,284.73 53,972.67 100.00 -2.37

TABLE 22. Composition of Exports to India
Ngultrum in Million
% Annual
Sl EXPORT CATEGORY 2013 2014 2015 2016 2017 Share %
in Total change
1 Live Animals & Animal Products 2.55 2.91 6.81 12.94 20.88 0.07 61.41
1.1 Raw Hides & Skins - - - - - - -
Vegetables, Fruits, Nuts, Coffee, Tea,
2 976.69 1,475.16 1,131.99 1,535.74 1,562.71 4.94 1.76
Spices, Cereals, Grains & Seeds
2.1 Potatoes 360.13 686.30 370.90 542.11 458.69 1.45 (15.39)
3 Animal or Vegetable Fats & Oils 2.94 13.71 8.04 9.74 9.52 0.03 (2.24)
3.1 Palm Oil - 0.00 - - - - -
4 Processed Foods & Beverages 578.91 838.00 897.39 1,067.38 1,010.70 3.20 (5.31)
5 Mineral Products inc. oils & fuels 3,308.93 4,800.19 4,813.75 4,646.48 4,683.21 14.81 0.79
6 Electricity 11,227.26 10,633.64 12,124.49 13,032.05 11,983.49 37.90 (8.05)
Products of Chemical & Allied
7 1,885.13 1,953.88 1,989.97 1,714.73 1,722.12 5.45 0.43
Industries
8 Plastic & Rubber Products 462.58 635.97 678.76 678.21 783.67 2.48 15.55
9 Wood and Wood Pulp Products 314.58 380.69 353.03 318.19 255.91 0.81 (19.57)
9.1 Wood Pulp Products 17.55 15.44 19.80 14.66 19.23 0.06 31.18
10 Textiles, Footwear & Hats/Headgear 43.95 29.93 10.81 1.11 2.38 0.01 114.01
Articles of Stone, Plaster, Cement,
11 152.40 196.47 168.41 150.24 113.03 0.36 (24.77)
Asbestos, Ceramics & Glass
Base Metals and Articles of Base
12 10,004.89 10,826.22 9,605.77 8,874.63 9,459.03 29.92 6.59
Metal
Machinery, Mechanical Appliances &
13 3.69 3.00 2.29 3.22 4.68 0.01 45.27
Electrical Equipment and Parts
Transport Vehicles & Aircraft and
14 0.33 - - - 0.06 0.00 -
Engines & Parts
Optical, Photographic,
15 Cinematographic & Measuring 0.02 - 0.04 - - - -
Equipment
Handicrafts, Works of Art, Collectors’
16 0.10 0.13 - 0.26 - - (100.00)
Pieces & Personal Effects
Miscellaneous Manufactured
17 14.22 11.55 9.80 7.51 6.71 0.02 (10.67)
Products
TOTAL 28,979.16 31,801.45 31,801.35 32,052.42 31,618.09 100.00 (1.36)
Source: Bhutan Trade Statistics, Department of Revenue & Customs. (Note: An entry of “0.0” indicates a marginal
value compared to “-” which indicates no value for that particular item.)

Statistical Tables
TABLE 23. Direction of Trade *

Ngultrum in Million
Item 2013 2014 2015 2016 2017

Exports
India 28,979.16 31,801.45 31,801.35 32,052.42 31,618.09
Bangladesh 1,464.98 1,661.89 1,817.47 2,397.96 3,486.28
Italy 191.13 477.66 152.18 26.96 428.20
Netherlands 154.71 227.67 434.09 51.19 350.96
Nepal 87.09 178.49 80.69 152.40 321.21
Germany 298.31 597.10 186.17 121.96 186.77
Hongkong 234.72 252.91 110.09 77.19 138.47
Japan 65.67 14.06 16.76 22.13 103.88
Turkey - 83.33 0.05 96.13
Spain 0.16 0.06 7.63 0.03 81.83
Singapore 17.28 61.69 169.82 7.64 62.99
Switzerland 0.61 0.25 10.73 0.30 56.05
Poland 3.89 - 0.04 51.64
Vietnam 1.93 9.33 4.14 26.20 50.19
Austria 0.04 11.52 0.12 46.54
UAE - 10.23 15.59 0.00 35.41
Thailand 28.93 32.49 23.06 40.61 33.64
United States 25.33 30.66 292.88 171.20 29.34
Malaysia 13.67 12.32 10.98 16.04 24.53
France 152.10 0.23 70.46 0.39 15.26
Others 133.24 121.67 25.22 93.27 79.07
Total Exports 31,852.95 35,585.00 35,229.31 35,258.11 37,296.47

Imports
India 43,889.37 47,847.62 53,740.51 55,284.73 53,972.67
South Korea 280.77 240.71 344.14 1,262.69 2,592.21
Japan 295.68 1,401.10 1,466.62 1,298.87 1,655.01
China 1,089.31 949.86 1,333.48 1,476.22 1,609.89
Thailand 1,080.89 812.15 1,168.95 1,486.73 1,262.09
Singapore 969.73 724.56 1,391.27 1,206.31 1,066.04
Germany 304.20 478.37 416.77 407.65 577.33
Sweden 816.95 244.20 732.84 260.20 496.64
UAE 69.90 150.24 161.15 306.61 372.09
Bangladesh 161.43 170.34 169.66 218.17 329.18
United States 183.60 137.54 176.78 360.93 224.08
United Kingdom 207.7 90.9 172.9 112.1 220.77
Italy 193.07 314.41 111.37 444.30 181.75
Austria 695.52 295.95 19.79 40.95 178.96
Hong Kong 90.55 119.41 133.73 179.14 154.55
Saudi Arabia 174.46 221.25 271.55 159.87 148.22
Norway 11.88 24.97 14.13 78.52 147.25
Vietnam 47.07 102.41 98.60 39.95 107.26
Qatar 152.13 202.86 136.88 147.63 103.70
Israel 60.52 34.36 199.82 92.20 91.71
Others 1
2,498.22 2,321.28 5,776.34 2,496.08 1,504.61
Total Imports 53,272.99 56,884.54 68,037.33 67,359.84 66,996.00
*By latest year rankings. 1) Others include imports from COTI routed through India from 2012 onwards. An entry of
“0.0” indicates a marginal value compared to “-” which indicates no value for that particular item. Source: Bhutan
Trade Statistics, Department of Revenue and Customs.

Statistical Tables
TABLE 24. Bhutan’s Outstanding External Loan
In Million
Rupee/Ngultrum in Million USD Million
Item
2015/16 2016/17 2017/18 2015/16 2016/17 2017/18
1. Convertible Currency Debt 41,178.49 42,759.00 47,990.20 609.00 663.22 699.82
i. Public 40,502.32 40,824.86 45,932.94 599.00 633.22 669.82
World Bank 12,507.16 13,475.71 17,058.67 184.97 209.02 248.76
IFAD 2,442.71 2,275.99 2,491.39 36.13 35.30 36.33
ADB 17,115.05 17,700.47 18,996.95 253.12 274.55 277.02
Govt of Austria 4,918.12 4,315.46 4,139.71 72.74 66.94 60.37
Govt. of Denmark 48.83 0.00 0.00 0.72 0.00 0.00
JICA 2,997.52 2,593.68 2,742.56 44.33 40.23 39.99
Deutsche Investment (hydro) 472.93 463.56 503.65 6.99 7.19 7.34
ii. Private 676.17 1,934.15 2,057.26 10.00 30.00 30.00
2. Indian Rupee Debt 115,393.81 118,770.09 133,190.70 1,706.59 1,842.21 1,942.25
i. Hydro Power debt 101,676.99 111,770.09 119,452.84 1,503.73 1,733.64 1,741.92
Tala 3,356.48 2,013.89 671.30 49.64 31.24 9.79
Punatsangchhu-I 42,543.69 44,543.69 46,043.69 629.19 690.91 671.43
Punatsangchhu-II 27,487.50 35,982.19 39,182.19 406.52 558.11 571.37
Mangdechhu 282,89.33 29,230.33 32,706.59 418.38 453.38 476.94
Nikachhu Project (SBI) 849.08 12.38
ii. Other
GOI Line of Credit 7,000.00 7,000.00 7,000.00 103.52 108.58 102.08
RBI Swap 6,716.82 0.00 6,737.86 99.34 0.00 98.25
3. Total Debt (CC + INR) 156,572.31 161,529.09 181,180.90 2,315.59 2,505.43 2,642.07
As a % of Total Debt
Convertible Currency 26.30 26.47 26.49
Rupee Debt 73.70 73.53 73.51
Total Loans in % of GDP 118.60 108.64 110.05
Nominal GDP (Calendar Year) 132,021.30 148,678.93 164,627.92
Exchange rate (Nu./USD) 67.62 64.47 68.58
Note: Debt data published by the RMA includes the total external debt of the country (public + private) and
are therefore not comparable to data published by the Ministry of Finance which covers only public debt.
Furthermore, the RMA uses calendar year GDP figures for all ratios to the GDP. Hydro power debt excludes
accrued interest.
Source: Department of Public Accounts, Royal Monetary Authority of Bhutan & private sector enterprises.

Table 25. External Debt Indicators
External Debt Indicators 2013/14 2014/15 2015/16 2016/17 2017/18

Total Outstanding (USD millions) 1,758.36 1,854.58 2,315.59 2,505.43 2,642.07
Convertible Currency (USD millions) 628.95 581.21 609.00 663.22 699.82
Indian Rupee (in millions) 67,870.15 81,183.64 115,393.81 118,770.09 133,190.70
Debt/GDP ratio *
Total 100.27 98.9 1 118.6 0 108.64 110.05
Convertible Currency 35.87 31.00 31192 28.76 29.15
Indian Rupee 64.4 1 67.9 1 87.4 1 79.88 80.90
Debt service ratio * (including OD)
Total debt service ratio 22.71 19.8 2 12.94 24.77 23.40
Convertible Currency 9.326 16.84 13.74 16.72 15.98
Indian Rupee loan 30.11 20.69 12.58 27.45 26.39
GDP (Nu. in Millions) 105,378.435 119,545.75 132,021.30 148,678.93 164,627.92
** Debt service payments as a percent of the export of goods and services. The total debt service ratio represents
the total debt service payments (i.e. on convertible currency & Rupee loans) as a percentage of the total export
earnings (from India & other countries). Convertible currency debt service ratio is the debt servicing on convertible
currency loans as a percentage of the export earnings from countries other than India. Similarly, the Indian Rupee
debt service ratio is the debt servicing on Indian Rupee loans as a percentage of the export earnings from India.
The debt service ratio for the latest period is calculated based on the previous year’s export of goods and services.

Statistical Tables
TABLE 26. Rupee Debt Indicators
Millions of Indian Rupees

2013/14 2014/15 2015/16 2016/17 2017/18
Total INR Debt Outstanding 67,870.15 81,183.64 115,393.81 118,770.09 133,190.70
Hydro power 56,595.90 73,196.26 101,676.99 111,770.09 119,452.84
Chhukha 0.00 0.00 0.00 0.00 0.00
Kurichhu 373.33 186.67 0.00 0.00 0.00
Tala 6,041.66 4,699.07 3,356.48 2,013.89 671.30
Punatsangchhu - I 25,738.07 31,423.69 42,543.69 44,543.69 46,043.69
Punatsangchhu - II 14,029.00 20,984.33 27,487.50 35,982.19 39,182.19
Mangdechhu 10,413.84 15,902.51 28,289.33 29,230.33 32,706.59
Nikachhu Project 849.08
Non-hydro power 11,274.25 7,987.38 13,716.82 7,000.00 13,737.86
GOI Line of Credit 10,000.00 7,000.00 7,000.00 7,000.00 7,000.00
Overdraft Facility 0.00 0.00 0.00 0.00 0.00
RBI SWAP 0.00 0.00 6,716.82 0.00 6,737.86
Dungsam Cement Corp. Ltd 1,274.25 987.38 0.00 0.00 0.00
Debt Service Payments 9,437.08 6,858.98 4,127.61 9,802.25 9,555.95
Principal 7,227.76 4,816.13 2,423.30 8,059.41 7,749.42
Interest 2,209.31 2,042.85 1,704.31 1,742.84 1,806.53
Debt Service Ratio (%) 30.11 20.69 12.58 27.45 26.39
Debt Outstanding % of GDP 64.41 67.91 87.41 79.88 80.90
Source: Department of Public Accounts & RMA

TABLE 27. Gross International Reserves (*)
Ngultrum In Million
Item 2013/14 2014/15 2015/16 2016/17 2017/18
1. Indian Rupee Reserves (INR in Million) 10,133.27 10,865.88 20,811.87 21,092.36 16,085.82
Royal Monetary Authority of Bhutan 9,493.07 9,826.55 19,017.73 19,433.11 14,534.35
Bank of Bhutan Limited 447.91 598.04 830.28 1,075.85 363.20
Bhutan National Bank Limited 61.91 193.91 141.99 212.23 514.57
T Bank Limited 74.91 77.25 175.94 122.35 479.97
Druk PNB Limited 55.47 170.14 645.92 248.81 193.74
2. Convertible Currency Reserves (USD in Million) 829.26 788.02 810.98 776.60 876.34
Royal Monetary Authority of Bhutan (1)
789.15 759.44 789.51 748.79 824.30
Bank of Bhutan Limited 22.71 20.26 13.37 10.99 36.18
Bhutan National Bank Limited 14.80 6.94 5.77 7.30 5.03
T Bank Limited 0.13 0.11 0.44 0.85 5.76
Druk PNB Limited 2.48 1.26 1.88 8.68 5.06
3.Total Reserves (USD in Million) (1+2) 997.89 958.45 1,118.77 1,103.76 1,110.91
4. Exchange rates used 60.09 63.75 67.62 64.47 68.58
5. Months of Merchandise Imports (2)
Total Reserves 12.61 11.71 12.92 12.56 13.01

Indian Rupee Reserves 2.57 2.56 4.25 4.45 3.29
Convertible Currency Reserves 61.17 51.37 57.11 54.29 62.59
6. Months of Imports (Merchandise + Services) (2)
Total Reserves 10.48 9.81 10.80 10.42 10.88
Rupee Reserves 2.30 2.32 3.77 3.98 2.91
Convertible Currency Reserves 37.69 32.49 37.12 32.80 40.68
(*) Excludes cash in hand of commercial banks.
(1)
Convertible currency reserves of RMA have been revised in 2013 to exclude the US dollar pledge on any
outstanding overdraft as of each reference period. Reserves also exclude (from July 2007 onwards) the local
currency component of Bhutan’s IMF Quota and the Kuwait Fund Investment; (2) Imports on fob basis. Figures differ
from previous publications due to revision in import figures - data for 2015/16 onwards are based on provisional
import figures for 2015/16 and are subject to change. From March 2017, reserve figures have been revised due to
conversion of Kuwait fund into Indian Rupee.

10
Chronology, Glossary
and Acronyms

Chronology of Major Developments
2015
the Gyalsey. On the same day,
The Macro Prudential Regulations RemitBhutan was launched to
on Disclosure Requirement was provide Foreign Currency Account
j issued to financial institutions for facility for Non-Resident Bhutanese.
implementation after RMA Board The RMA also handed over surplus
approved in January 2015. profit (of new Nu.874 Million) to the
RGoB
j In January 2015, the Investment
Guidelines for Insurance Business Parliament endorsed waiver on tax on
was issued for implementation to j interest earned from fixed deposits of
individuals on November 28, 2016.
carry out the insurance business.
Recorded historic growth in the
Issued Securities Broker’s license to
j country’s INR reserves of 31.74 billion
j Drukyul Securities Private Limited
to conduct security activities in
on December 2, 2016.
February 2015. Approved the Rules and Regulations
Issued a directive on abandonded

j for Deposit Taking Microfinance
Institution (DTMFI) on December 29,
j Property (in line with Sectiion 245 of
FSA) in February 2013.
2016.
The CRR was increased to 10 percent 2017 Signed Board-Management

Performance Commitments and
j from 5 percent in order to manage
liquidity in the banking system in j implemented the guidelines on
March 2015. Certificate of Deposits (CDs) on
January 3, 2017.
The Credit Information Bureau Bhutan Immediate Payment Service
Regulations was issued in March
2015 to safeguard the credit data and
j (BIPS) was launched on January 27,
j consumers’ interests.
2017.
Launched the Commemorative The new design of Nu.100

Denomination Commemorative
j coins for the 60th Birth Anniversary
celebration of His Majesty the Banknote was launched on February
Fourth Druk Gyalpo Jigme Singye j 5, 2017 to celebrate the First Birth
Anniversary of His Royal Highness
Wangchuck on November 6, 2015.
The Gyalsey, Jigme Namgyel
2016 Wangchuck.
Launched INR exchange counters at RemitBhutan was launched in Perth,
j RMA on January 12, 2016. The Global
Money Week was launched on March j Australia by Finance Minister on
February 5, 2017.
3, 2016.
Renewed the Bilateral Currency Implemented the New Private Money

Lending Rules and Regulations on
j Swap arrangement with RBI for INR/
NU equivalent of USD 100 million on j April 1, 2017.
March 17, 2016. In collaboration with the Ministry
of Labour and Human Resources
j REDCL and RENEW was registered as
micro-Loan Institutions on May 21,
j and Ministry of Finance, the RMA
2016. introduced the Overseas Education
and Skill Development Scheme on
Based rate was replaced by the April 7, 2017.
j Minimum Lending Rate on August 1,
2016 Signed MoU on Cross Border
On 21 September, 2016, His j Supervision with the Reserve Bank of
India on April 13, 2017.
j Excellency, Lyonchhen Dasho
Tshering Tobgay launched As the inaugural BEFIT event, the
the Nu.1,000 Denomination
Commemorative Banknote
j International Financial Inclusion
Summit on the theme “Equitable
to celebrate the birth of HRH Growth through Financial Inclusion”

and Acronyms
was hosted on May 24-26, 2017. Signed a Memorandum of
Launched the Internet-based Point j Understanding (MoU) with Royal

Bhutan Police and Civil Society
of Sales (PoS) at fuel stations in Organizations Authority on February
j collaboration with the commercial
banks and the Department of Trade,
20, 2018.
Ministry of Economic Affairs (MoEA)

on June 15, 2017.
j Launched Druk MicroFin an
integrated MFI and CSI banking
platform on May 16, 2018.
Signed the MoU on Money Laundering
and Terrorist Financing with Bhutan Approved the Amended Regulation
j Narcotic Control Agency on July 7,
2017. The MoU on Money Laundering j for establishment of commercial
banks and RENEW’s proposal for
and Terrorist Financing was also establishment of DMFI (RENEW
signed with FIU Sri Lanka and FIU Microfinance Private Ltd) on May 22,
Cambodia on July 16 and 19, 2017 2018.
respectively.
Received the Country Award from the
Implemented web based Cheque
Truncation System (CTS) on August j Child Youth Finance International
(CYFI) for Regional Winner-Asia & the
j 15, 2017. Approved the e-Money
Issuer Rules and Regulations during
Pacific and Certificate for the Global
Finalist-Asia & the Pacific for Global
its 130th Board Meeting held on Money Week 2018 held during the 7th
September 29, 2017. Global Inclusion Awards 2018.
Opened Currency Exchange Counter Implemented Rules and Regulations
j at the Paro International Airport on
October 9, 2017. j for Insurance & Reinsurance
Companies in Bhutan on July 1, 2018,
and the Corporate Governance Rules
Launched the Remit Bhutan in United and Regulations 2018 (CGRR 2018) on
j Arab Emirates (UAE) and Kuwait
respectively on October 19 and 21,
July 1, 2018.
2017. j Opened the INR Exchange Counter at

the Department of Immigration Office
Signed the MoU with Myanmar in Phuentsholing on July 6, 2018.
Financial Intelligence Unit
concerning cooperation in the Signed a Memorandum of
j exchange of financial intelligence j Understanding (MoU) with Financial

relating to money laundering Intelligence Unit (FIU), India on July
associated predicate offences and 26, 2018, during the 21st Annual
terrorist financing on October 31, Meeting of Asia Pacific Group (APG) in
2017. Kathmandu, Nepal.
Lyonchhen Dasho Tshering Tobgay

launched the Guidelines for Priority
j Issued the Rules and Regulations for
Cottage and Small Industries (CSI)
j Sector Lending (PSL) on December 13, Bank.
2017.
His Majesty awarded the prestigious

j Bhutan Care Credit Microfinance
Project was licensed on July 1, 2018
Druk Thuksey medal to Dasho and launched on August 14, 2018 as
j Penjore and the RMA during the 110th
National Day Celebrations in Haa on
j
the 4th MFI.
December 17, 2017. Introduced exchange counter at
2018 Implemented the Reserve

Mongar Regional Office on September
1 2018.
Management Policy with effect from
j January 1, 2018.
j Jointly conducted Workshop on the
Modernization of Monetary Policy
Implemented the Whistle Blowing Frameworks in Bhutan, India and
(WB) Policy as proposed on December Nepal on September 10-11, 2018 in
j 29, 2017. Paro.
The RMA Board endorsed the adoption j The RMA successfully closed
accounts for the financial year
j of the BAS in Accounting Policy from
January 1, 2018.
2017/18 and transferred a surplus of
Nu. 1,550.24 million to the RGoB on
October 3, 2018.

ABBREVIATIONS AND SYMBOLS
FDI Foreign Direct Investment
ADB Asian Development Bank FI Financial Institution
ACU Asian Clearing Union FIRMA Financial Institutions Ratio
AFI Alliance for Financial Inclusion Management and Analysis System
APG Asia Pacific Group on Money FIU Financial Intelligence Unit
Laundering FSA Financial Services Act
ARNW Average Return on Net Worth FSDAP Financial Sector Development Action
ATM Automated Teller Machine Plan
AML/CFT Anti-Money Laundering and FY Fiscal Year (July-June)
Combating the Financing of FYP Five Year Plan
Terrorism
GBRL GIC-Bhutan Re. Limited

BEA Bhutan Electricity Authority GDP Gross Domestic Product
BDBL Bhutan Development Bank Limited GEPF Government Employees Provident
BHP Basochhu Hydropower Plant Fund
BHSL Bhutan Hydropower Services Limited GOI Government of India
BICMA Bhutan InfoComm and Media GPMS Government Performance
Authority Management System
BIL Bhutan Insurance Limited GVA Gross Value Added
BNBL Bhutan National Bank Limited
BOBL Bank of Bhutan Limited ICT Information and Communication
BOP Balance of Payments Technologies
BPC Bhutan Power Corporation IDA International Development
BPFFS Budget Policy and Fiscal Framework Association (World Bank)
Statement IFAD International Fund for Agricultural
BPM6 Balance of Payments Manual (Sixth Development (UN)
edition) IIP International Investment Position
IMF International Monetary Fund
INR Indian Rupee
CC Convertible Currency IPO Initial Public Offering
CDCL Construction Development
Corporation Limited JBIC Japan Bank of International
CHP Chhukha Hydropower Plant Cooperation
COTI Countries Other Than India JICA Japan International Cooperation
CPI Consumer Price Index Agency
CRR Cash Reserve Ratio JV Joint Venture
CSI Cottage and Small Scale Industries
CY Calendar Year (Jan-Dec) KHP Kurichhu Hydropower Plant
LPG Liquid Petroleum Gas

DANIDA Danish International Development
Agency M0 Reserve Money
DCCL Dungsam Cement Corporation M1 Narrow Money
Limited M2 Broad Money
DGPC Druk Green Power Corporation MFCC Macroeconomic Framework
DHPCL Dagachhu Hydro Power Corporation Coordination Committee
Limited MFCTC Macroeconomic Framework
DHI Druk Holding and Investments Coordination Technical Committee
DMB Deposit Money Bank MFSM Monetary and Financial Statistics
DPNBL Druk PNB Bank Limited Manual
DPRs Detailed Project Reports MLR Minimum Lending Rate
DRC Department of Revenue and Customs MOEA Ministry of Economic Affairs
DSPBL Drukyul Securities Broker Private MOF Ministry of Finance
Limited MOLHR Ministry of Labour and Human
DWAL Druk Wang Alloys Ltd. Resources
MOU Memorandum of Understanding
MPC Monetary Policy Committee
ECIU Energy and Climate Intelligence Unit MPFA Monetary Policy Framework
FATF Financial Action Task Force Agreement

and Acronyms
MW Megawatt TA Technical Assistance

NBFI Non Bank Financial Institution TBL T Bank Limited
NFA Net Foreign Assets TCB Tourism Council of Bhutan
NGO Non Governmental Organization THP Tala Hydropower Plant
NPL Non Performing Loans
NPPF National Pension and Provident Fund UNCDF United Nations Capital Development
NRB Non-Resident Bhutanese Fund
NSB National Statistics Bureau UNDP United Nations Development
NTTFC National Transport and Trade Programme
Facilitation Committee UNICEF United Nations International
Children’s Emergency Fund
ODF Overdraft Facility UNWTO United Nations World Tourism
OIN Other Items Net Organization
USD US Dollar
PNB Punjab National Bank UTB Unit Trust of Bhutan
PPI Producer Price Index
PPN Purchasing Power of Ngultrum WALR Weighted Average Lending Rate
PPP Public Private Partnership WEO World Economic Outlook
WHO World Health Organization
RAMP Reserve Advisory Management WPI Wholesale Price Index
Program
RBI Reserve Bank of India
REDCL Rural Enterprise Development Statistical Symbols
Corporation Limited
RGOB Royal Government of Bhutan e estimated
RICBL Royal Insurance Corporation of
Bhutan Limited p provisional
RMA Royal Monetary Authority
RNR Renewable Natural Resources r revised estimates
RSEBL Royal Securities Exchange of Bhutan
Limited - the figure is zero or less than half the
final digit shown or the item does not
SAARC South Asian Association for Regional exist or the figure is not available
Cooperation
. the figure is unknown or is not
SAARCFINANCE Network of SAARC Central meaningful or is not to be published
Bank Governors and Finance
Secretaries --- change within a time series, causing
SBI State Bank of India a break in continuity
SDC Swiss Agency for Development and
Cooperation () negative
SDR Special Drawing Rights
SEACEN South East Asian Central Banks Indian Rupee
SME Small and Medium Scale Enterprise
SWIFT Society for Worldwide Inter-Bank Note: Discrepancies in the totals are due to rounding.
Financial Telecommunications

READERS’ FEEDBACK ON THE ANNUAL REPORT
Dear Reader:
We welcome comments or suggestions that will help us to improve the content and format
of the Annual Report. Please contact us at the following address:
Director
Department of Macroeconomic Research and Statistics
Royal Monetary Authority of Bhutan
P.O. Box 154
Thimphu
Bhutan
You can also email us at: rsd@rma.org.bt
Please visit our website www.rma.org.bt for information on the RMA and to access all of our
publications.
The RMA Publication User Survey is also attached at the end of this report and can be
accessed online on the RMA website.
Thank you.

and Acronyms
USER SURVEY FOR RMA PUBLICATIONS
Please take a few minutes to answer the following questions to help to improve the quality
and accessibility of the RMA’s publications.
Q1. Are you a frequent reader of RMA publications?
Yes ( ) No ( )
Q2. How do you usually gain access to RMA publications?

Website ( ) Hardcopy ( ) Others - please specify ( ) __________________________
Q3. Which RMA publications do you usually use?

Monthly Statistical Bulletin ( )
Annual Report ( )
Monetary Policy Statement ( )
Other – please specify ( ) __________________________
Q4. Which sections of the RMA publications do you find most useful?
RMA’s Vision, Mission, Values and Organizational Structure ( )
Key Macroeconomic Highlights ( )
Macroeconomic Review ( )
Monetary Policy Operation ( )
Financial Sector Development ( )
Exchange Rate Arrangement and Implications ( )
Financial Inclusion and Payment System ( )
Annual Financial Statement ( )
Statistics ( )

Q5. On a scale of 1 to 5, where 1 = “extremely dissatisfied” and 5
= “extremely satisfied”, how would you rate your level of overall
satisfaction with RMA publications?
1( ) 2( ) 3( ) 4( ) 5( )
Q6. RMA publications are comprehensive in covering all Bhutan

macroeconomic issues. Please indicate whether you:
1. Strongly disagree 2. Disagree 3. Undecided 4. Agree 5. Strongly Agree
Q7. Do you use the data found in RMA publications?
Yes ( ) No ( ) Sometimes ( )
Q8. If you have any additional comments and/or suggestions to

improve the quality of RMA publications, please write them here.
___________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
Thank you for completing the survey. Kindly send it to the Department of Macroeconomic
Research and Statistics, Royal Monetary Authority of Bhutan, by email, fax or post.
The questionnaire can also be accessed online at www.rma.org.bt


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RMA Annual Report 2018 1

2 RMA Annual Report 2018

This Report reviews the macroeconomic developments and

We would like to thank all who have contributed to the

i RMA Annual Report 2018

The RMA is inspired by this honour from His

Governor Dasho Penjore (left) with His Majesty the Druk

RMA Annual Report 2018 ii

RMA receives Global Inclusion

His Excellency, Kutshab Tshering Gyaltshen Penjor,

iii RMA Annual Report 2018

Some of the notable accomplishments of the

On the operational front, the RMA successfully

Against these positive backdrops, the RMA

RMA Annual Report 2018 iv

v RMA Annual Report 2018

Monetary Policy Operations 51

RMA Annual Report 2018

11 RMA Annual Report 2018 11

12 RMA Annual Report 2018

Our Vision monetary policy, and promoting

R einforcing stable and inclusive professional conduct through

M aintaining stability and

Resilient- We will promote a stable and sound

Our Values Timeless- We will endeavour to uphold the

STRATEGIC PILLAR 1: STRATEGIC PILLAR 2:

RMA Annual Report 2018 13

His Majesty awarded the Druk Thuksey (Heart-

14 RMA Annual Report 2018

RMA Annual Report 2018 15

Board Audit Committee

Governor Executive Committee

Deputy Governor Governor’s Office Deputy Governor

16 RMA Annual Report 2018

Executive Directors and Directors

Mr. Jai Narayan Pradhan

Mr. Sherab Jamtsho

Mr. Gopal Giri

Ms. Gopi Nepal

Ms. Tshering Wangmo

Ms. Dechen Pelzom

RMA Annual Report 2018 17

Following were the key Ms. Rinzin Lhamu

18 RMA Annual Report 2018

an Accounts Assistant, Accounts

In 2018, he was placed as the RMA mourns the

RMA Annual Report 2018 19

Managerial Development Policy and Planning

20 RMA Annual Report 2018

Social Club Activities : FY 2017/18

RMA Annual Report 2018 21

RMA Annual Report 2018 23

Sluggish GDP growth in 2017 Key drivers of economic growth in 2017

Headline inflation moderated in FY 2017/18

Trade & current account deficits persist

-24.3 2015/16 2016/17 2017/18

24 RMA Annual Report 2018

Fiscal deficit remained manageable

Sources of Money supply (Growth, %) Monetary policy