Home / Business / Domestic credit at 107.8B
Financial institutions in the country lent Nu 107.8B in the domestic market as of June this year. The economy saw domestic credit swell by Nu 12B in a span of 12 months. In June last year, the cumulative figure of domestic credit stood at Nu 95B.

Domestic credit at 107.8B

Financial institutions in the country lent Nu 107.8B in the domestic market as of June this year.

The economy saw domestic credit swell by Nu 12B in a span of 12 months. In June last year, the cumulative figure of domestic credit stood at Nu 95B.

This is according to the figures from the Royal Monetary Authority (RMA), excluding credit from the National Pension and Provident Fund.

The RMA’s financial inclusion initiative is expected to fuel domestic credit to almost 50 percent of the GDP in the medium term, according to the monetary policy statement. This will be contributed mainly through the enhancement of access to credit transmitted via financial inclusion initiatives.

However, it was also stated that credit growth has a direct impact on the current account deficit because Bhutan is highly import-dependent and, therefore, a large portion of any credit extended by the financial sector translates into imports and subsequent pressures on the current account.

Priority sector lending, micro-financing, agent banking, promotion of cottage and small scale industries and minimum lending rate policy, among others, are some of the initiatives under the financial inclusion program targeted to improve access to finance.

With more than 23 percent of domestic credit injected into building and construction, the economy continues to pump air into the housing bubble. Loan for building and construction has reached Nu 25B as of June this year from Nu 21.7B in June last year.

It was a lending spree that ignited the rupee crisis a few years ago because most of the credit translated into imports, shedding the country’s rupee reserve as well as hurting the current account balance. This was followed by loan and import restriction on housing and vehicles.

A higher economic growth without the adverse impact like rupee shortage and current account deficit, a local economist said is possible if credits are diverted towards sectors that could boost domestic production, create jobs and substitute imports.

The economic stimulus plan, priority sector lending, micro financing and other entrepreneurships programmes are some of the ongoing efforts.

However, going by the figures, housing has the highest loan portfolio, followed by service and tourism, which increased from Nu 20B in June last year to Nu 25B in June this year. Lending for manufacturing sector increased Nu 12.7B to Nu 13B during the same period. Likewise, loan in the trading sector also increased by more than Nu 1B.

While the cumulative figures of transport loan as of June last year stood at Nu 5 B, which saw an increase of almost Nu 1.5B in 12 months time.

At the same time, loan for agriculture, the sector which employs more than half the work force, is just Nu 5.7B, which is an increase from Nu 5.1B in June last year.

Tshering Dorji 

Check Also

Govt. to sign APA with BCCI

The joint sitting of Parliament yesterday endorsed the Public Accounts Committee’s (PAC) recommendation to sign …

Leave a Reply