Yearender/Economy: The Sheep has delighted its Shepard as it hands over the coffer to the Monkey.

On the economic front, the sheep year transpired the economy to recover from all time low GDP growth of 2.05 percent, fatigued by rupee shortage to 5.5 percent escorted by swelling reserves.

Things are looking better today, reserves have improved, inflation is stable, GDP has improved to Nu 119.5B, there is no longer the shortage of Indian rupee and the central bank has opened more counters to exchange rupees.

The country is witnessing some structural changes and transformation with GDP contribution of secondary and tertiary sector surpassing the primary sector.

With the lift of credit restriction, construction sector is back in the field, private consumption has increased so has small businesses.

Small, cottage and medium industries has recorded a major growth of 15 percent compared with the past year. This is fuelled by Business Opportunity and Information Centre (BOiC) coming into business.

However, after much scrutiny on the legal aspects in the Parliament, the government has decided to close its shop to be reopened as a state owned enterprise.

Not only did the economy improve but also the country was able to repay Nu 21.9 billion (B) short-term borrowing availed in the 10th plan to ease rupee shortage

Domestic revenue has grown by an estimate of 12.5 percent on the back of higher export revenue of sale of electricity, commissioning of Dagachhu and increased taxes.

The news of Dungsam Cement plant attaining its set production target and capturing the hydropower market also came as a relief to the Shepard.

But amidst the glowing health of economy, the Shepard is already made aware of the uncertainties as the country prepares to graduate from the Least Developed Countries (LDC) category. The repercussion will result in reduced grant and aid, posing pressure on the debt burden.

The country also relished the global fuel price fall that resulted in more than 17 price cuts, the direct impact of which is felt on the inflation figures stabilizing at 4 percent.

With generous credit, Bhutan imported 22 new cars every day on an average spending more than Rs 3B. Fuel bill almost negated the electricity earning, threatening the energy balance of payment.

Import of essential items shot to Nu 8.05B in 2013 and Nu 8.9B in 2014. Economists are speculating further increase in import bill with number of foreign expat workers increasing as the country pursues its hydropower dreams.

At this rate, the country’s entire INR earning from electricity falls short to import essential items including fuel.

In the banking sector, bankers are reading more newspapers than banking. Bankers joke among themselves that from a period of crazy banking in 2012, that tolled excessive lending, things have more or less settled down to lazy banking today.

Interest rates among the five banks in the country have remained more or less the same. In some areas, lending has been made rather more restrictive by revising the debt equity ratio on loans.

Bhutan has also performed relatively well in global indicators like doing business ranking and economic freedom index. However, the ranking came under question, when it did not capture actual reality in the market and improvement was attributed to change in methodology.

The government has also formed two new state owned enterprise besides the BOiC. The Bhutan Duty-free limited, Royal Bhutan Lottery Limited and a couple of planned state enterprises  is now for the monkey to make it work.

Tshering Dorji