Bhutan’s Foreign Currency Reserve Hovers Near Constitutional Minimum
Bhutan’s foreign currency reserve is teetering on the edge of breaching its Constitutional threshold, as the latest figures released by the Royal Monetary Authority reveal that the reserve stands at USD 464.66 million as of October. This amount is perilously close to the mandated minimum reserve of USD 464 million, which is required to cover at least one year’s worth of essential imports.
The current reserve is only sufficient to cover 12.02 months of essential imports, raising concerns within the financial circles. While there has been no official discussion on imposing a moratorium, the finance ministry acknowledges the delicate situation.
Analyzing the foreign currency reserve trend over the past 10 months, from January to October, it is evident that the reserve has dwindled by over 25 percent from its January peak of USD 625 million. October alone witnessed a decline of USD 2.39 million from the previous month.
Simultaneously, the Ngultrum, Bhutan’s national currency, experienced a depreciation of Nu 1.34 against the USD, reaching a rate of Nu 83.23 during the same period. This depreciation adds another layer of concern to the economic landscape.
As of October, Bhutan’s total foreign exchange reserve is reported to be USD 505.6 million, comprising USD 464.66 million in foreign currency reserve, USD 34.19 million in special drawing right (SDR) holdings, and USD 6.75 million as a reserve tranche position in the International Monetary Fund (IMF).
Given Bhutan’s dependence on imports, the country’s import figure as of September recorded Nu 85.69 billion (USD 1.04 billion) against an export value of Nu 41.48 billion (USD 503.53 million). Calculating the average monthly import value over the last nine months, the figure stands at USD 86.69 million.
This stark contrast between exports and imports reveals a trade gap of USD 536.7 million in the last nine months, underscoring the need for additional financing to cover the country’s essential imports. With limited revenue sources from exports, tourism, remittances, and grants, Bhutan faces the imminent risk of breaching its Constitutional mandate in the coming months, necessitating careful economic management to address the growing concerns.
By Kinley Yonten
