བློན་ཆེན་དང་ལྷན་རྒྱས་གཞུང་ཚོགས་ཡིག་ཚང་།

Frequently asked question

Dear friends,

We are launching a new series of Frequently Asked Questions. In this, I will make an attempt to elaborate or clarify some of the critical and significant policy decisions we made over the years.

By doing so, the government is not justifying or trying to buy you in on the decisions. What is the fact must be presented and as a Bhutanese, it is the responsibility of every single individual to know what transpires at national level.

I take it as my primary duty to inform and take questions anytime, anywhere possible.  Over the years, we have used many platforms and channels, to interact and communicate. And yet, there are deficiencies. Many aspects of governance and socio-economic development plans, major reform initiatives and activities are either misunderstood or misrepresented.

It is another reality that no policy or decision will favour everyone. Every change will have an impact.  What we must understand is that the disruptions, if any, are short term. Give it some time and our wishes are for our nation and every Bhutanese to benefit.

Our government’s tenure coincided with some of the most auspicious events in our country. We were most fortunate to welcome and celebrate the birth of His Royal Highness Gyalsey Ugyen Wangchuck. Among others, we also saw historic announcement of Gyalsung program, enactment of the Act and its commencement in 2024.

The celebration of His Holiness Trulku Jigme Choeda’s 25th Year as the 70th Je Khenpo was a historic milestone, as was that of the 400th Year of the founding of Zhung Dratshang.

The award of Blue Planet Prize by the Asahi Glass Foundation, Japan to His Majesty the Fourth Druk Gyalpo gave immense joy to our people. His Majesty The King’s award of Ngadag Pelgi Khorlo to Prime Minister Narendra Modi of India, the first to any foreign leader, symbolised the highest esteem Bhutan continues to regard its special relationship with India.

Our governance also took place amid a national and global context. The national context is two-fold. First is the ambitious 12th Five Year Plan which began with an outlay of Nu.310 bn, and spiked to over Nu. 317 bn today. Second is the Great Transformation initiated under His Majesty’s courageous and visionary leadership.

The global context was deeply influenced by the COVID-19 pandemic. Between the closing and opening of our international border to deal with the menace of the virus, the government committed substantial resource and manpower for two and half years, while ensuring that critical public service delivery were not compromised.

It takes a great leader to steer us into the post-COVID 21st Century, and fortunately we have His Majesty The King. In addition to the boundless love and benevolence we receive every day, our biggest confidence is His Majesty as we wage forward.

Whatever the government has achieved so far within the challenges of the pandemic and the opportunities of the Transformation would not have been possible without His Majesty’s wisdom and guidance, steadfast support of the public servants and the participation of our people!  The government remains deeply humbled and honoured by His Majesty’s gracious recognition and commendation of our efforts.

With a lot of lessons learnt and experiences gained, we feel the seven months of the tenure the government is left with is loaded with excitement. We will make every hour count to realise the plans and programs that will fortify Bhutan for now and generations to come.

In this, be a part of the process as you have been. We will take your questions, suggestions and feedback at all levels, be it a walk-in or even a phone call. To begin with, we answer the first set of frequently asked questions (FAQs) captured through formal and informal media platforms!

  • Spending in the most efficient manner, the government has already utilised about 98 percent of the initial Nu. 310.9 bn budget allocated in the 12th FYP.
  • To start with, the allocation was Nu.193.8 bn for current expenditure and Nu.117 bn for capital expenditure, totaling to Nu. 310.9 bn. While this total allocation is in itself significantly higher than the allocation of Nu.152.2 bn for the 10th Plan and Nu.215.4 bn for the 11th Plan, numerous additional programs were carried that took the budget to way over Nu.317 bn as of today.
  • In fact, the expenditure of Nu.141.8 billion for capital works is more by Nu.24.8 bn than the allocated budget of Nu.117 bn! For current expenditure allocation, Nu.163.6 bn or over 84% has been already spent.
  • Majority spending went into fighting the pandemic, constructing Granular Sub-Base roads across the country, numerous water projects, starting MBBS college and cluster hospitals, initiating national digital identity and digitisation of schools, among others, that were far beyond the initial plan.
  • What this shows is better efficiency in using the allocated budget. This also shows the extent to which development works of 12th FYP are being implemented in different communities across our gewogs and dzongkhags. And the Plan is still on!
  • In the first instance, it must be clarified that no local government, central agencies or autonomous bodies can contact, negotiate and acquire donor assistance directly by bypassing the government’s established institutions and mechanisms. All external assistance, loans or grants, have to be acquired and disbursed through existing institutions and processes. It is wrong to mislead people by communicating that individuals and agencies acting on their own have mobilised funds to implement projects.
  • The total grant mobilised during our tenure is Nu.71.9 bn for the 12th FYP! Compare this with Nu.53.9 bn received for the 10th FYP and Nu.60.1 bn for the 11th Likewise, the government has mobilised a loan of Nu.59 bn for 12th FYP. A significant amount of loan (Nu. 30 billion) secured from ADB, World Bank and JICA are at highly concessional rates ranging from 0% from World Bank to just about 1.75% from ADB. The loan for 10th FYP was Nu.45.8 bn and for 11th FYP, Nu.95.7 bn.
  • What the figures indicate is that we have mobilised an external assistance of Nu.130.9 bn, including grants (55%) and loans (45%). Hence the perception that the government has not been able to mobilise external assistance is a misrepresentation!
  • On the other hand, the government has provided Block Grant to local governments and dzongkhags. The Ministry of Finance has released 100% of the committed Block Grants giving financial autonomy and flexibility to local governments. It also makes them more accountable.
  • We must first acknowledge that despite the depletion of foreign currency, we have not felt the impact on our everyday life, or altered our behaviours. For instance, there has been no job or salary cuts.
  • The primary cause of depletion of foreign currency reserve is the import of vaccines, health equipment and medicines during the pandemic. Besides, essential food items to last at least three months were imported on a regular basis. These measures were critical to ensure that lives and livelihood of our people were safeguarded. All these happened at a time when some of our dollar generating sources were completely shut.
  • During this time, the government also had to commence debt servicing for Mangdechu Hydropower Project. This is in addition to the servicing of other debts which were done without interruption.
  • We have not defaulted on any loan instalment which is critical to ensure the confidence of countries and financial institutions which provide us with required loans. Even as the imports increased and debt servicing continued, there was no inflow of foreign currency particularly due to the complete halt for two and half years of tourism, which is one of the main sources.

The following measures are being pursued in order to build up the reserve:

a)Mobilisation of additional grants of 9 billion from GoI and other donors.  As per the 12th FYP plan projection, the grant mobilisation is only about Nu. 63 billion but as of today, it has touched Nu. 71.9 billion!

b) Mobilisation of highly concessional borrowing from multilateral development banks.

c) Designing special Green Bonds package to encourage foreign remittances and onshore investment with government backed securities.

d)Diversification of source of Hydro project investments.

e) The government is also working on monetising carbon credits. It also recently approved at least 10 additional ferro silicon factories to leverage export and earn foreign currency. Many newer initiatives are also being planned, so please follow us closely!

  • The COVID-19 pandemic and the prolonged enforcement of stringent containment measures had a negative impact on the economy by shrinking GDP growth to an all-time low of negative 10.1 percent in 2020. The global economic recovery has been impacted with the war in Ukraine and the resulting increase in energy prices, rising input costs, supply chain constraints and tightening global financial conditions.
  • The direct impact of all these is felt through inflation and unemployment. Nonetheless, recovery is taking place with the easing of restrictions although it is a gradual process. This is not an isolated case of Bhutan but a universal scenario generally across the globe. For example, multinational companies like Google, Microsoft and Amazon already laid off thousands of employees. The global economy is already into recession phase.
  • Encouragingly, our economy recorded a growth of 4.09 percent in 2021, a 14.1 percentage point increase from 2020, supported by accelerated public expenditure and implementation of development projects. The growth rate in 2019 was 5.8 percent from a 3 percent dip in 2018 and as expected, ceteris paribus, for 2020 onwards was more than 6%.
  • Rising prices and supply chain disruptions resulted in higher and increased inflation. However, inflation in 2022 dropped to 5.64 percent from 7.4 percent in 2021.
  • Food prices moderated in 2022 led to a decrease in food prices to 5.1% in June 2022 compared to 10.1% in June 2021.
  • Unemployment rates greatly fluctuated between 2.7 percent in 2019 and 5.9 percent in 2022. The first high unemployment rate of 5 percent was observed in 2020. As of June 2022 however, 44,888 jobs were cumulatively created across all agencies and 223 start-ups established. We are positive that the trend will improve by the year!

Like migrants from other countries to Australia, Bhutanese have also been leaving for educational purposes and in search of better economic opportunities. It is a case of people from low-income society leaving for one of the highest paid in the world. This has started many years ago. Many more will leave in the foreseeable future.

–        The COVID-19 pandemic which saw closure of border in many countries, including Bhutan and Australia, have restricted travels and held back people who have already made plans to leave. Once the restrictions were lifted, there was a surge in people leaving the country. The relaxation of visa regime by the Australian government for Bhutanese have also created conditions for easier and faster travel and movement. It demonstrates the confidence of Australian Government for Bhutanese Government and the people.

–        The government is always of the view that the quest for higher learning, of pursuing one’s dream, or of securing a livelihood for the family are experiences and opportunities everyone must seek in life. It also means amassing skills and capacities, as well as personal enhancement and garnering worldviews while we progress as a nation.

–        The government must not and will not stop keen people from pursuing such ventures. In fact, we have been facilitating in whatever ways possible, like helping individuals to sit for language tests or offering assistance to firms that offer the services. Health examinations for medical certificates are also provided now at Mongar and Gelephu regional hospitals so that applicants do not have to travel to Thimphu.

–        We say this with strong conviction, knowing how we are a Bhutanese no matter where we go. If we do well, it means our nation will do well.

–        On the one hand, there is the perceptions that the government must do something to prevent or reduce migration to Australia. On the other hand, there is also the feeling that the government is not doing enough to support people from humble backgrounds to go to Australia. Last year, it was blamed for not printing and issuing enough passports in time and for not facilitating access to loans. No one said this was good and the passports should not be issued so that people will stay back.

–        Today, the government is under pressure to negotiate with Australian government to do away with requirements for IELTS examination and broaden access to loans so that people can leave. A few years ago, it was blamed for providing scholarships to all Class X students to enable them to study till Class XII. Today, it is acknowledged that this decision was really helpful for many of those who have gone or will go to Australia as the minimum educational requirement is Class XII.

–        It is the responsibility of the government to create the right economic opportunities, incentives and conditions for Bhutanese to live and work here at home. For those who are working abroad, we hope to encourage them to make investments at home. Bhutanese should work in reputed international companies from Bhutan and we must have a system for Bhutanese to work for Bhutan from any part of the world.

–        However, it is our earnest hope and prayer that many Bhutanese will eventually return home acquiring the level of education and skills which will benefit our country immensely.  In the short-term, their education, work experience and exposure in Australia creates important assets for Bhutan. The launch of Gyalsung Program will go a long way in re-connecting young Bhutanese with their beloved country.

In addition to the relief kidu granted by His Majesty to thousands of individuals during the pandemic, interest payment support was also granted to many businesses affected by the pandemic. This was with the sole purpose of keeping businesses afloat and sustain the economy. The government adopted various fiscal and monetary measures to support businesses. It includes-

a) deferment of Corporate and Business Income Taxes,

b) waiver of rents and other charges for tourism business entities leasing government properties,

c) deferral of sales tax and custom duties on essential items,

d) provision of working capital at 5% to wholesalers and retailers,

e) provision of short-term working capital loan at 7.02% interest to CSIs, medium and large industries for purchase of raw materials and payment of wages,

f) provision of working capital at 5% to tourism business entities to finance operation costs,

g) deferment of loans for all borrowers,

h) micro loans up to 500,000 at 2% interest for CSIs, and

i) initiating the Containment Facility in all the boulder exporting areas to minimize the impact of pandemic while continuing exports.

The government has initiated many activities to support the ease of doing business and creating an enabling business environment.

a) The cottage level manufacturing sector was shifted to registration system without the need for fees and clearances. More than 170 licenses in this category now enjoy the regulatory reform with process time of less than half an hour. This reform is in line with the concept of “innovate first, regulate later” which does away unnecessary regulatory-related burdens.

b) The Integrated Business Licensing Service System (IBLS) – Phase I was instituted providing a single window to obtain trade license, small scale license and clearances from Thimphu Thromde as a pilot project. It is expected to go all out by June 2023 providing a single platform for all business-related process.

c) The moratorium of alcohol licensing and mining were lifted to provide equal business opportunity to all.

d) Except for tobacco, alcohol, luxury goods and motor vehicles, customs duty on all products (foods and non-food) was revised to a flat single rate of 10 percent, irrespective of country of origin, to provide wider choices of goods.

e) The Fiscal Incentives Act was amended to promote export and substitute imports, 100 percent investment allowance, leveraging technology and innovation, and promoting domestic/local industries.

The noble objective of the Transformation, as commanded by His Majesty in the last winter session of the Parliament, is to fulfil the aspirations of our people, who in fact experience problems in their daily lives. In His Majesty’s direct address to Karma Dechen, the person and the symbol of those struggling every day, His Majesty said, “This transformation is so that you will have your own home, money, and the ability to leave your children an inheritance.”

–        It is the genius of His Majesty the King in converting the challenges of the pandemic into an unprecedented opportunity for initiating major reforms and undertaking the Transformation, however difficult and painful they may be experienced and perceived in the short term. The government has unquestioned faith and loyalty in the vision of His Majesty and confidence in the noble objectives of the Transformation in the long run, and has the honour of implementing various aspects of the Transformation during its tenure.

–        While the Royal wisdom and vision always highlighted the need for rapid and urgent Transformation, the Royal Addresses during the 113th and 114th National Days in Thimphu and Punakha, the Royal Address to the Joint-Sitting of Parliament in 2022, the two kashos on Civil Service and Education granted at Punakha to the people of Bhutan had set the tone, context and direction of the transformation.

–        His Majesty commanded that the ongoing national efforts for Transformation gives hope despite our challenges. His Majesty was very gracious to thank the members of the parliament for supporting the ongoing Transformation efforts. The government was deeply humbled when His Majesty said: “It is difficult for elected governments to introduce change, even if they are beneficial for the country…Our government, led by the Prime Minister, has been fearless and firm in their resolve to carry out the transformation process, which we all deeply appreciate.”

No one appreciates any increase in taxes or levies even if it is by one Ngultrum. The right to cast vote is desired. The duty to pay taxes is dreaded. While the perception is that revised taxes are high, the actual value may not be so if inflation is taken into consideration. Tax is also revised by only 0.1% of the value of property. Although the revision was decided in the Parliament last year, it will come into effect only towards the later part of this year, which will be more than a year after the pandemic. To some extent, this provides the necessary time cushion for tax payers.

–        Tax liabilities between rural and urban areas have been very inequitable. For example, a tax of Nu.12 was paid for one acre of land whether it was in urban or rural areas. Taxes so far had not taken into account the value of land, which must be the basis for taxation. The value of land is determined by the Property Assessment and Valuation Agency. The PAVA rate is now being revised. This will have great benefit to rural households as they can have more access to loans due to the increase in the value of their lands when used as collateral.

–        One important point to note is that there will be 50% rebate on dry lands and 90% rebate on wetlands. Besides, there is a legal provision whereby the government can waive off tax liabilities for those who are genuinely not in a position to pay. Besides, property owners will continue to benefit with deductions when filing income taxes if they have loans on their properties like buildings.

–        It is also important to note that vehicle taxes have been increased only for high value and luxury vehicles. Taxes have NOT been increased for everyday essential goods. There is zero tax for essentials, sports goods and electronics.

–        The revision of taxes is part of larger reforms in our economy. At present, tax revenue contributes only about 12% of the GDP, which is one of the lowest in the world. Tax revenues are important means of redistributing resources and narrowing the gap. No government will revise taxes upward on the eve of election as it is a great electoral risk. However, this government has done so in consideration of larger national interest in the context of ongoing financial and economic Transformation.

No one appreciates any increase in taxes or levies even if it is by one Ngultrum. The right to cast vote is desired. The duty to pay taxes is dreaded. While the perception is that revised taxes are high, the actual value may not be so if inflation is taken into consideration. Tax is also revised by only 0.1% of the value of property. Although the revision was decided in the Parliament last year, it will come into effect only towards the later part of this year, which will be more than a year after the pandemic. To some extent, this provides the necessary time cushion for tax payers.

–        Tax liabilities between rural and urban areas have been very inequitable. For example, a tax of Nu.12 was paid for one acre of land whether it was in urban or rural areas. Taxes so far had not taken into account the value of land, which must be the basis for taxation. The value of land is determined by the Property Assessment and Valuation Agency. The PAVA rate is now being revised. This will have great benefit to rural households as they can have more access to loans due to the increase in the value of their lands when used as collateral.

–        One important point to note is that there will be 50% rebate on dry lands and 90% rebate on wetlands. Besides, there is a legal provision whereby the government can waive off tax liabilities for those who are genuinely not in a position to pay. Besides, property owners will continue to benefit with deductions when filing income taxes if they have loans on their properties like buildings.

–        It is also important to note that vehicle taxes have been increased only for high value and luxury vehicles. Taxes have NOT been increased for everyday essential goods. There is zero tax for essentials, sports goods and electronics.

–        The revision of taxes is part of larger reforms in our economy. At present, tax revenue contributes only about 12% of the GDP, which is one of the lowest in the world. Tax revenues are important means of redistributing resources and narrowing the gap. No government will revise taxes upward on the eve of election as it is a great electoral risk. However, this government has done so in consideration of larger national interest in the context of ongoing financial and economic Transformation.

– Revising the SDF was one important strategy to achieve the transformation in the tourism sector. It directly reinforces the policy of “High Value, Low Volume” and make Bhutan a real high end exclusive travel destination. While the SDF of USD 60 had remained unrevised and stagnant for more than 30 years, the value of money has changed over time. There is an annual increase in inflation rate and thus needed to be compensated. While the number of tourist arrivals increased particularly due to regional tourists, the revenue earning was disproportionately less. There was danger that everyone can now afford to visit Bhutan, making it a cheap destination. And as a small country and with limited holding capacity, we could not go that way.

– Before deciding on the rate of SDF for international tourists, various rate options were explored ranging from USD 424-912 per person per night based on multiple scenarios. However, it was agreed at USD 200. The earlier Minimum Daily Package Rate of USD 250 per person per night was commonly misconceived, accepted and marketed as SDF amount in the international market. Therefore, it was felt that this amount would be more acceptable. For regional tourists, the SDF was fixed at Nu.1,200. The MDPR was also lifted.

– As we all know, the COVID-19 pandemic was a global phenomenon affecting every country in extreme ways, taking unprecedented toll on lives and livelihood. It is not a figment of imagination conjured up to explain or justify any government action or inaction. For Bhutan, the danger took on heightened significance in view of our location between China and India.

– The origin of the virus in China and closure of our border for two and half years to prevent cross-border transmission from India took on special meanings. For Bhutan and Bhutanese, our very survival as a country and people were at stake. The 700,000 of us could have been easily wiped off if it were not for His Majesty’s extraordinary leadership, courage and wisdom!

– We understand the gravity of threat to our survival when we look at death tolls in other countries. A per the record, over 1.15 million Americans lost their lives. That’s far more than the population of Bhutan. Brazil lost about 700,000 lives which is exactly the size of our population. Our close friend and neighbour, India, lost over 531,000. Russians lost nearly 400,000 of their people while Mexico lost 333,000. Bhutan’s loss of 21 lives is one of the lowest in the world if we take the percentage of death based on the size of population. Most of them had comorbidity issues which were aggravated by Covid. However, the loss of each of these precious lives has been extremely painful to everyone, particularly to the families and especially to His Majesty.

– It is not that the virus spared us because of our small population and chose to inflict damage elsewhere. We were at serious and imminent risk of dying by the thousands! His Majesty’s insight of Covid dynamics – both scientific and strategic – timely intervention, whole-hearted support of the people and the vital vaccine aid mobilized by the government from international community particularly India, helped us achieve an unthinkable outcome in consideration of our limited resources, health infrastructure, mountainous terrain and dispersed nature of village settlements.

– The pandemic challenged and tested us to our limits. To save the lives of our people and ensure their safety during such critical moments are the most important responsibility of any government. Saving of lives have been possible due to the fast and sustained vaccination of nearly 99% of our people in record time, a feat whose achievement drew international attention and admiration. This alone would stand out as a towering achievement.

– The whole machinery of the government including its manpower and resources were put at the disposal of the collective fight against Covid. The monastic community led by His Holiness The Je Khenpo, public servants, armed forces, De-suups and volunteers worked tirelessly round the clock inspired by His Majesty’s love, care, compassion and courage. We spent about Nu. 12 billion to meet various expenses related to implementation of Covid measures.

– The pandemic came one and half years after the government was formed and disrupted the 12th FYP. Since the closure and opening of our international border, it cost the government two and half years, which is exactly half of our tenure fighting the Covid. Thereafter, we were left with only one year and one month before the completion of our tenure to implement the remaining projects. The pandemic was therefore, never an excuse!