Stop the bleeding

During their interview with BBS TV last week, Lyonpo Yeshey Zimba and Lyonpo Wangdi Norbu went to great lengths to inform us that the so-called rupee crunch wasn’t a crisis. They told us that the situation was normal; that they’d been aware of it for a long time; and that they were in full control of it. They told us that we should not be worried, that we should not panic. And they warned us that any talk about a crisis “could be deliberate attempts to discredit the government.”

I’m not one to worry needlessly. But I’m not reckless either. So I try to piece things together, and when they don’t add up, I get worried. I get scared.

On the one hand we have the government telling us that everything is okay. But their assurances are followed by reports, only a few days later, that RMA’s short-term rupee borrowings have already hit Rs 9.7 billion.

Just four months ago, RMA’s rupee borrowings had peaked at Rs 11 billion (3 billion from GOI credit line, and 8 billion from an overdraft facility maintained with the State Bank of India). The government, at that time, sold US$ 200 million for Rs 10.3 billion and liquidated the Rs 8 billion SBI overdraft credit. So RMA would have been left with a loan of Rs 3 billion (GOI credit) and cash reserves of Rs 2.3 billion.

Now, four months later, RMA’s short-term rupee borrowings have already climbed to Rs 9.7 billion. Of that amount, Rs 3 billion is the earlier credit from GOI. So that means, rupee borrowings have increased by Rs 6.7 billion in four months. Add to that the Rs 2.3 billion that was left over after clearing the SBI overdraft credit, and we get Rs 9 billion. That figure should equal the rupee deficit during the last four months. And that deficit seems to be growing. So I’m scared.

Our combined imports exceed our exports. That’s why we have a rupee crunch. But the rate at which the deficit seems to be growing is alarming. It was a record Rs 8 billion last year (that’s why the government sold US$ 200 million). And now, within a span of barely four months, the economy has been hit with a deficit of Rs 9 billion.

Our economy is bleeding. But the government does not seem to know it or does not care to admit it. They have not yet identified the problem. Instead, they blame the private sector, and seem to think that the rupee crunch will be solved mainly after GOI extends their credit line from Rs 3 billion to 10 billion.

Loans will not solve our problem. They’re good only for temporary respite. Eventually, loans will make matters worse.

Yes, we must curtail private consumption. But that has been the focus of  RMA’s many measures. And that doesn’t seem to have helped.

What we must do – and what I’ve said over and over again – is curtail government expenditure. The government’s expenditure has grown dramatically since 2008. And unless the government reins in their excesses, the rupee crunch will continue. In fact, it will get worse.

Eventually we must work hard to correct and improve our balance of payments. We must import less. And we must export more. There’s a whole lot we can and must do: agriculture, construction, education, tourism, ICT, hydropower, mining, manufacturing and even lottery, all of them represent big opportunities. But all of them will take time.

For now, we must stop the bleeding. And most of it takes place by way of government consumption. So the government must stop all unnecessary spending, especially excessive recurrent expenditure. The government must go into austerity mode.

Here’s what the government has spent and is spending.



Facebook Comments:


  1. The Patriot says

    Your Excellency,

    You made perfect sense during the BBS program asserting that the major cause of the rupee shortage is due to an increasing trend in Government expenditure. I know the blatant argument at that point of time from some quarters was that the Economy runs in a way that they see it and there is no relation between Government Expenditure and the rupee shortage meaning that private consumption was supposed to be the main cause. However, the Government after a month or so took your recommendation and issued directives to tighten their belts:- i guess now they realized that this was the major cause of the rupee shortage. Bhutan needs economists at this point in time to run the economy not orators/philosophers..tats for sure..

  2. solo-kamtang says

    The country (like my own family) have been on a spending spree, so much so that the RMA has no rupees in the nation’s coffers (and family has zero savings!) I do not feel the crunch as I can get everything I want with Nu. I guess if I had a child studying in India or if I am building a house I would need rupees to pay for labour and materials.
    But I do get the eerie feeling that this government is spending the nation’s cash mercilessly and will leave the next government empty coffers and a bankrupt nation. I know running a government is no child’s play but shouldn’t the country’s purse strings be handled by economists and good managers not social scientists?

  3. Solo shokpo" says

    Really, nations is deceased of rupee crunch and ceasing of loans coz of this most of the low-middle income are affected. people are confused ? Really confused? I heard our government has given huge loans and is already running on debt? Does that figure really mean that huge loan are really given to needy person or is just calculation of mathematics like numerator/denomerator.Does that figure really speaks reality or else thing. I mean to say that is loan are given in equity manner ? has government has reviewed the financial institutions how loans are benefiting ? to common people or just else….? I hope it is time to really review reality otherwise ‘ richer may get richer and poorer may get poorer? ?
    this is just my view

  4. The Worst response we always get from our Goverement is that the problem is under control and people should not panic. Recently they added one statement that is people are deliberately degrading the Goverment as 2013 alarm is heard by all.

    Simple and practical thing is how can they say all those when things are moving different directions. What is happening on actual ground has be totally different in many cases. At times they are not confident of what they are saying and doing. Messing things in last minute. if proper long term measures are not taken rite now…Rupee is going to drag everyone of us.

  5. I think the government reps, knowing all the macro/micro economic situation of the country, clarified the rupee crunch issue that was blown out of proportion by the vested interest media houses.
    I thank the govt in making it crystal clear that bhutan is not in crisis as some ppl with half baked knowledge about the economy would call.
    I am particularly happy to know the following.
    1. All our debt is related to investment which is pay back in future.
    2. Our dollar reserve still is more that what is required by the constitution
    3. A big chunk of the rupee crunch was caused by our govt prefinancing construction of rural infrastructures.
    4. The current rupee crunch is an”along the development path” symptom which every developing country can’t escape, unless we reside in idealistic realms like our OL.

    I salute the govt for all the progress made till now

  6. Problem is that we have unnecessary things flowing into the country. Developing country is one good thing, but developing it on the basis of bringing foreign cars (that too with less tax), foreign furniture, cloths, wines, and many….it has proven that for a 5 rupee that we earn from India, we spend 500 rs on buying things from them and other countries. I heard that Indians earn 3000 per month through their salary, and spends 2500 on consumption per month while Bhutanese earn 3000 Nu per month but spends 6000 per month.Our approach to things are very bigger than life which is in long run a shoddy and stupid show off.

    The increasing of tax by government was condemned so much by media, opposition party and many like myself, but now going by the fact that we spend 7 billion per year on oil imports, it makes me scared that most of us speak about things by looking at what we can see but not assuming things which could be behind the wall. Now with a very low tax, we have a rich section of people owning two to three cars, some of which are useless. WE dont use much of public transport facilities.

    Government has always been crying over the fact that many of us have forsaken the practice of agriculture even though country’s one third of the population depend livelihood on farming. BUt interesting thing much to the contrary is that our food consumption more than 80 percent is imported from India, right from salt to rice, and there wont be a day too long from now on when even the villagers would leave the farming for some labour work which would give them enough money in three days to buy 50 kilo of rice (imported one) because the farming in their own field is way expensive. Government might have gone educating students and peasants on advantage of farming, but have not helped people in realising it by making it a profitable business by which i mean less expenditure and more profit. Our policies are on making things equal and fair to the all the walks of people in city but often villages are overlooked which i feel is the real back bone of the country.

    On the fact that government wants to prove to the people of having done something useful and helpful during their tenure, one goes on building things which are beyond one’s capabilities, and like in most of the cases, one can’t even eat more than one’s capacity. This is what happened to our country. In fulfilling all those promises a politicians have made to the people, government goes on delivering few expensive ones which ultimately resulted in increasing the government budgets, and in executing these things, the cost of import increased drastically, and then the crunch which is too hard to munch.

    We are always happy and relaxed that our power projects would earn us the money back, but the rate at which we would be able to complete the loan payment seems far from reality. by the time we finish paying the debt, these dams and hydels will be worn out and then we borrow money to repair it, and funny things is that due to so much excution of the project, during the summer time, Bhutanese have to import electricity from India ( Where is our country going?), its scary how much deep shit we are in.

  7. How and why we should not worry about rupee shortage in the country:
    A-stop import of all non-essential commodities that have flooded our market places.
    B-stop import of all non-commercial vehicles for 3 years (90% can’t afford in any case but the govt. and FIs didn’t feel or realize it)
    C-stop all construction loans for 3 years.
    D-Agri ministry stop all fancy ideas and just concentrate on growing grains and vegetables on a war footing and start tomorrow with diary farming.
    E-Cut down chadis for all except for the Royal Family and the elected head of the govt.
    F-cut down foreign trips except for the elected head of the govt. and technical/professionals.
    G-stop import of building materials like bricks… we have locally available bricks, hollow blocks.
    H-make FDI more friendlier to allow in more money.
    I-stop or put on hold the ambitious plan of IT park and Edu City till we stabilize our economy.
    J-Cut down medical treatment funding except for financially challenged people.
    K-there are 100s of things in the market that we Bhutanese can well do without. List them and stop them.

  8. My landlord has two children studing in India. Recently I received a notice of rent increment by almost 40%. I also noticed that some of my colleagues have also got similar notices. Has crisis something to do with this?
    Suddenly, I observe that everything has become more expensive. I am a grade 6 civil servant with a working wife, a kid and grandma living together. Housing, food and clothing leave us with no savings at all.
    I wonder how others with low salary are managing. My heart pains to think and see those who earn just about Nu 10000/- with family – struggle to survive.

  9. ” Going gets tough, tough gets going.” The rupee crunch at this hour was a good lesson not only to the Government, but to us all including laymen. I consider myself literate but I never had the slightest idea how valuable the foreign currencies are and especially rupee. Until recently when RMA has stopped its supply did I realized (I guess all the countrymen)it’s importance.

    Limited issue and banning was the right approach undertaken by RMA. If we were to educate our countrymen on the value of foreign currencies through meetings, gatherings, media etc. none of us would have listened to it let alone implement what was being told. It would have wasted a lot of resources with payment of travel and daily sustenance allowances to the resource persons as well as the advertisement charges to media. With the “RMA approach” everybody got sensitized. I appreciate the approach and such measures could have been implemented long before. Nevertheless, it was not too late.

    Having said that our next approach is to look beyond and move ahead. We must not blame the present government thought they are partly responsible. Blaming and opposing does not solve the purpose. We love our country and in crisis like this we must love more. Thus, it is us- the Drukpas who must come together and work hand in hand providing solutions, both short and long terms in order to curb the rupee crunch.

    Some of the measures have already been shared by some of the readers. I would like to add upon my thoughts which I felt pertinent and reliable:
    1. The government must make mandatory that 75% of the workforce for national contractors must comprise of Bhutanese. This will have a larger impact in the long run. Our contractors have the mind set of dis-owning and classifying Drukpas as incompetent, lack of skills and lazy. Nevertheless, Drukpas are found competing at the International workforce. It is in fact irony to hear such comments. Therefore, as mentioned above the government must have stringent law in place.

    2. We have seen a lot more graduates passing out every year and they are found unemployed. On the other hand substantial numbers of expatriate are seen in civil service. It is high time that we replace them.

    3. Local agricultural produce must be encouraged and at the same time the prices must be checked. Our business policy is so complex that it kills both the customer and the seller. A kilo of local red chilli can never be Nu.1000/- unless otherwise its gold plated, but we see it in our market.

    4. There is a need for the change in education curriculum. Like the internship for MBBS graduates our children is middle secondary schools must be sent to villages during monsoon to have a hand on experience in farming. This would aid our literate children to go back their village and make their living as RCSC wishes to be “small, efficient and compact” resulting into a haywire system with shortage of manpower.

    5. As mentioned in one of my earlier response we must try to deforest the southern foothills in phase wise manner. The timber and other forest produce may be sold to India to earn rupee. For the long run the deforested areas may be planted with oranges and tea to yield cash in rupees in the long run. This project may be undertaken by the government. The other option can be to lease the land to farmers with certain percent of payment to the government for certain number of years and thereafter to be returned to the government. The latter option would narrow the gap between the haves and the have- nots. However, the government must be position to help farmers to establish the same.

    6. The cultivation of yartsa goenbub also must not be restricted to the locals. The government must encourage any Drukpa to harvest the same so that more income can be generated.

    7. The most important aspect that the government can do is to stop constructing farm roads. It is just a begging bowl for votes. It creates more of havoc to the community with landslides and destruction to the agricultural fields than benefiting the community.

    Long live Palden Drukpa!!

  10. the rupee crisis is transforming to an economic disaster..both the ministers trying to explain the problems did just that – they made a shoddy job of explaining it, while offering no concrete solutions..this, despite them both holding the finance portfolios..
    for them to say the rupee problem is not a crisis is total lies..if it’s not a crisis, how do they explain a rupee shortage of over 9b in 4 months after clearing almost the same amount by selling off 200m usd..
    we now see unprecedented events unfurling – banks stopping loans, people looking for rupees to make payments, people hoarding rupees, nu being depreciated against the inr by 20%, indian business accounts being withdrawn, banks facing liquidity crunch, the central bank stepping in with multiple measures..these are events new to bhutanese, so how can this government say there is no can they pretend, lie & be irresponsible when they admit on tv that they are monitoring the situation on a daily basis..followed up with instructions to ministries to slash expenditures by 10%..
    banks have been too free with credit, this government has been way too liberal with public finance, wangdi norbu, jigmi thinley & the entire cabinet are clueless on solutions & irresponsible in actions (khandu wangchuk’s road show in india i understand cost something like 140 lakhs..and what benefit did this bring to bhutan?), instead playing the blame game and calling it political motivation..
    this problem is here to stay unless radical measures are initiated..
    saying there is no crisis, while a change in daily habits is imminent is absolute ignorance on the part of this government..
    had it not been for daw tenzin to recognize these problems, even now, & more importantly to step in with bold measures is commendable..this could get worse if it is left to jigmi thinley & the incompetents..
    bhutan is bankrupt of rupees, jigmi thinley & this government bankrupt of solutions & the people are overloaded with unnecessary difficulties..

  11. The greatest irony here is that every body is complaining why government is not doing anything. But if the government does try to do something, the people who are complaining will take it to court.

    The same people who are complaining are so bad that they are quietly taking advantage and making profit out of what little restrictions the government has put on the people.

    Please get it through your head that complaining does not solve the problems. Willing to accept some small sacrifices will.

    Tobden, will you grow up? How idiotic you all have become? Daw Tenzin cannot do whatever he pleases because Bhutan and its policies are not in his hands. He has full government support in whatever he is doing. What makes you think he has the authority to do whatever he please with regard to polices that affect the nation?

    I support the banks not giving loans because that is the only way to make the Bhutanese live within their means. On the one hand, people do not have extra cash to fuel up the car and yet he will not think twice to buy a car on loan. On the other hand, the banks have been paying huge dividends to their share holders because they have been giving unsecured loans and loans that does not help the economy. In the process, the banks have helped usher in a culture of wanton spending.

    When you talk of Lyonpo Khandu Wangchuk’s road show you are in effect revealing the famous Bhutanese mentality of wanting immediate returns.

    It is disgusting the way you guys go on and on. Just remember, governments cant help if the people are unwilling to make the necessary sacrifices.

    If there is indeed a problem, STOP GRUMBLING and suggest useful answers to our problems. Even a fool can grumble endlessly so we are not impressed with naggers.

  12. Loans are making things worse! 🙁

  13. I feared the DPT gov would get another chance to lei to the public

  14. Somebody has said that we should encourage local workforce and that we have skilled and capable people to work. I don’t see any local workforce available in the country! The few or the little we have, should be left in the villages to grow grains, vegetables, produce cheese, butter and eggs to reduce imports of essentials we can produce from within! Instead, we must promote agriculture and related enterprises and create enabling conditions and not let the rural life structure dry up! Please think again.

  15. This is a lesson for the people, not for the government. Most Bhutanese choose to consume in relaxation and choose not to produce. Many of our farms are left empty and the farmers depend on the indian produced food by somehow managing the expenditure from here and there.

  16. Please read Kuensel’s ‘Two sides to a Coin’ .
    The author Colm Lanigan says

    “Bhutan relies, and perhaps always will rely, on India for the majority of its imports. It is what is referred to as a “structural” issue, because a change in behaviour alone will not change the situation – it is deeper and intrinsic to the geopolitical situation of Bhutan. The rupee situation has existed at least since the 1990s.The RMA sells dollars to pay off the line. It did so in the 1990s, it did it recently and, with almost certainty, it will have to do so again. Simply doing so should not be a cause for panic. ”


    “There is in fact hope – since 2002 imports from India have grown at an average of 18% per year. That is a lot of growth – but exports have grown faster at 28% per year. The difficulty is that exports started from a smaller base, and so will require several more years of growth to catch the imports. ”

    and again
    “Surprise – Bhutan has an overall balance of payments surplus. You would not have known this from the recent discussions and policy responses. Bhutan’s overall balance of payments with countries other than India was approximately Nu 5 billion for fiscal year 2011, and it has been positive for the several years. This overwhelms the negative balance with India, and this overall surplus has allowed Bhutan to build reserves to almost $1 billion before the recent purchase of rupees. They are called “reserves” for a purpose. They exist to provide a “cushion” for periods when adjustment is necessary. These reserves have grown at almost 15% per year over the last 20 years. This is impressive.
    Why is this? Among the reasons are that Bhutan has been successful at growing and attracting dollar or euro paying tourists, developed export industries in the south, and has strong relationships with donor countries willing to invest in Bhutan’s future by funding projects. These are signs of the success of the Bhutanese development model.”

    So looks like RGoB has done a good job -the rupee crunch notwithstanding.

  17. Firstly I want to declare in his own blog, I do not buy the ideology of our so called OL.
    I think instead of looking for every inch of opportunity to put his finger at gov, he need to realize and give constructive ideas and support to the govt, if he thinks he really is serving the nation as OL, not fulfilling his personal agenda.

    As far as I’m concerned, we do not realize the importance of our own country unless we face with such problem which is not so severe rather a good lesson we can learn that how important our country and its currency bears for us too. If we bhutanese are cautious and have in really what we say always ” THA DAMTSHI LAY JUMDDEY”, we need to think two-three ways.

    We import everything from neighboring towns with our currency, that amount goes unaccounted because these merchants do not pay TAX to either Indian gov, rather they find their earnings save heaven in Bhutanese Banks where by they take huge amount of INR in return back to India, for which our govt. pays some interest to Indian Reserve Bank.

    And what else can gov. do, the people commenting in this forum I’m sure are doing dirty personal business, by cheating our Banks to obtain INR and exchange with those Illegal Business, not realizing they are devaluing our own currency and making nuisance of the motherland.

    We need to realize, all educated lot rather than complaining and OL taking to court or so that,
    i. high time our taxes are revised, if we are to achieve self sufficiency rather than allowing few people to build paradise with minimum tax.
    ii. we need to realize that we are not part of India and to know that BC is our currency that if Indian or other people come to BHutan, they need to have have it exchanged from IC.
    iii. We also need to know that the moment we cross the border towns we are stepping into foreign land that we do necessary arrangement to live in that land.
    iv. lastly, to those looters, let us not cheat ourselves by cheating banks for INR and sell at higher rate, because, ultimately we are making mockery of our own currency which we need to realize that it too have significance.

  18. Once me and my friend were discussing about this “RUPEE CRUNCH”, as we went on with our conversation…..he added a funny statement, “The houses in the Olakha area should be dismantled and replace it with the paddy field again”. Jokes apart this actually makes sense….people should realize about our own ability. Agriculture sector is one sector where we can work on it and several others which is mentioned in the above comments. Together we can overcome this problem.


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