Too good

Yesterday’s economic forum was scripted and implemented to perfection.

  • The forum, which was organised by GNHC and supported by the UNDP, was called “Macroeconomic Challenges, Opportunities and Policy Options for Bhutna” and held at the National Convention Centre.
  • The forum was attended by the prime minister, cabinet ministers, senior civil servants and
  • The forum was NOT attended by the governor of the Royal Monetary Authority and his two deputies. The CEOs of the financial institutions could not attend as they were summoned, by the RMA governor, for a separate meeting.
  • The experts at the forum included Professor Joeseph Stiglitz of Columbia University, and Dr Rob Vos and Dr Hamidur Rashid from UN’s department of economic and social affairs.
  • The experts concluded that our banks had lent too much money too easily, that private consumption was too high, that are foreign currency reserves were very high, that we should use our foreign currency reserves, and that the rupee crunch was caused by our inability to properly manage our foreign currency reserves.
  • Professor Stiglitz, a Nobel laureate and leading economist, certified that the rupee crunch is not a crisis.
  • Lyonpo Yeshey Zimba reiterated the findings of the expert group, and counted the economic successes of the government.
  • And the media – print, TV and radio – informed our people that experts, led by a Professor Stiglitz, had found that our economic situation was not in trouble, and that the rupee crunch could easily be dealt with by proper management of our foreign currency reserves.

If all this sound too good to be true, it probably is.

Consider this: Just 6 months ago, in December last year, the RMA’s rupee borrowings had peaked at Rs 11 billion, and the government had sold US$ 200 million for Rs 10.3 billion to clear Rs 8 billion. So at that time we were left with Rs 3 billion in credit, and Rs 2.3 billion in cash.

Today, the RMA’s rupee borrowings have reportedly already hit Rs 15 billion. And we have already spent the Rs 2.3 billion we had in cash. So that means that in the last six months we have accumulated a rupee deficit of 14.3 billion (Rs 15 billion – Rs 3 billion + Rs 2.3 billion = Rs 14.3 billion).

We owe Rs 15 billion. And we have US$ 720 million in reserves. US$ 720 million equals more than Rs 41 billion at today’s exchange rates. That’s an excess of Rs 26 billion. And that’s why the international experts have us convinced that the rupee crunch is a foreign currency reserve management issue; not an economic crisis.

Now consider this: we accumulated a rupee deficit of 14.3 billion in less than 6 months. If we use our foreign currency reserves to clear this debt, we’ll be left with the equivalent of Rs 26 billion in foreign currency reserves. But at this rate, we will have run up a deficit in excess of Rs 26 billion in less than one year. And we can again use our foreign currency reserves to clear this deficit too.

But then we’ll be left with nothing in our foreign currency reserves. Forget about the Constitutional requirement of maintaining foreign currency reserves not less than one year’s essential imports – our foreign currency reserves will have dropped all the way to zero; it will have been completely depleted. In other words, if, as the experts suggest, we “manage” our foreign currency reserves, we will have spent our entire reserves in less than a year, and we’ll be forced to accept, belatedly, that we are dealing with a major economic crisis.

So don’t blame the mismanagement of our foreign currency reserves for the ongoing rupee crunch. And, please, don’t think of misusing our reserves.

Instead, look at where the real problem lies. Look, for example, at government expenditure. And ask our experts if an increase in government expenditure from 21 billion per year (in 2008-09) to 38 billion per year (budgeted for 2011-12) could have caused the rupee crunch; ask them if excessive and uncontrolled government expenditure is what could have caused the economic crisis.


Facebook Comments:


  1. Why, in the first, are we so dependent on experts opinion and impressed by their knowledge and wisdom applicable to countries geographically and culturally different from Bhutan? Why was such a forum necessary regardless of who paid for it? Are we headed for another McKinsey trip? If the experts don’t think we are facing economic crisis, are we lying through our teeth or they don’t understand what crisis is? Let the experts face our business community for an open forum and we will question them! Of course, the fault lies with us Bhutanese, our planners and our very own management style of practicing ‘penny wise and pound foolish’ crap! But for simple people like us, we should not buy the high profile deliveries of the experts.

  2. Keith Hardesty says

    Whatever you do…do not listen to American financial institutions for economic advice. The American dollar will soon take a big depreciation!!! People here are not able to pay their bills or buy FOOD and gas for our cars. Small businesses are reducing prices to empty inventories, and pay their bills. This will leave nothing to restock goods, or pay employees. Our housing markets are still declining…with more ready to default! GRAB YOUR PANTS AND HOLD THEM UP…LOL!

  3. Dear Karma Tenzin

    For a senior citizen like yourself, I am disappointed that you are beginning to sound like the rest of the other wet-behind-the-ears kids that seem to frequent this blog. The Opposition Leader has a reason to sound like the demented person he is not. He has a need to be a professional whiner. He is paid to do so. If he fails to be that, his survival is in jeopardy. But what is your reason?

    You cannot be sane and at the same time suggest that Professor Joseph Stiglitz and other eminent speakers at the forum are making statements that are false and baseless. Can you imagine that they would jeopardize their professional credibility and their reputation to deliberately mislead a bunch of Bhutanese people?

    Kuchey wai Atta Yongba, be reasonable.

  4. Sangay Peldhen says

    It makes me eager to know where government have spent that extra 17 billion and for what purpose is it being spent. And as clearly mentioned by the OL, using our foreign reserves as seemingly good solution at this moment would be dangerous and too much of risks against economic danger of collapse. Thank you OL for being so sensitive.

  5. Young Mind says

    When they say it is not a crisis, what more crisis Bhutan should have than this. As pointed by OL, rapid rise in government expenditure within few years might be the reason why we are crippled with such crisis. Bureaucratic in nature, the government always screens reality and feed with cooked justification to mislead the public in such times.
    Please, I on behalf of youth of Bhutan would like to request every Bhutanese to come together and be transparent to sort out the problem and then combat it, not just depending on some expertise from foreign countries who might be generalizing the problem without realizing the ground reality. They should scrutinize Government expenditure and should come with something that says DPT government went wrong some where- and this is what we youth feel and share among ourselves.
    Thank you all the veterans participating here, and from hence forth I will try to represent the youth with some research prior to my comments.

  6. Who is this introvert ProOL who think that whatever other says is nothing but whatever he/she says is everything?

  7. I think a more reasonable interpretation would be that Stiglitz is trying to be accurate (he did mention government debt) while also trying to be friendly with DPT by repeating their concerns about the consumption of imports. Its true that the situation would be MORE of a crisis without the current level of foreign reserves, but its also true, as OL points out that the current rate of government borrowing will wipe out those reserves if they are tapped.

  8. When the expert said that the failure of the management of the foreign currency reserves was a cause of our Rs crunch,they are absolutely right because we have the money in reserve but we don’t want to use it. Rather we resorted to borrowing. This is economically foolish. Ofcourse even a lay economist like me understand what Joseph Stiglitz says. It is crystal clear. As a bhutanese, i dont get why our government cannot use the dollar reserve to buy Rs in times of such crunch. We have excessive reserve by our economic standard, yet we will hoard that much money in a “unplugged refrigerator” and let students in Lhuntse and orong suffer from nutritional deficiencies. This is us, GNH hypocrites.

  9. JYT and his version of GNH is leading our economy down the drain. GOD SAVE PELDEN DRUKPA. WE DON WANT TO BE THE GREECE OF ASIA

  10. Everyone is talking only about problems or issues relating to the crises,by now everyone knows about this fact. For me, it now really does not matter on how this huge issue evolved or blaming anybody regarding the same. Rather, for me I want an early answer from our great leaders, specialists, economists, bankers or anyone on how we can move ahead? When will things get normal? I am really eager to read the words that will lay down some practical reforms, words that would help us to solve this particular issue.

  11. It is interesting how economics as a young discipline could depend on who interprets the situation. And this crazy situation in Bhutan is attracting the best of minds around the globe to have it.

    I strongly agree Professor Stiglitz when he said this is not a crisis. His stand of not referring to it as crisis must be based on the conviction & straight line interpolation of economic principles. Otherwise like Americans felt the US housing bubble, we feel the Rupee crisis commensurate with our carrying capacity of the economy.

    I also agree to OL when he straight went on to prove, also a straight line equation,that 2+2=4. Bur since we don’t live any more in Crusoe Economy, this interpretation does not hold water either.

    Bhutan is becoming too dependent on outside views- i find it more like an intellectual colonization. If this government needed to prove her citizen using some international scholars that this is not a CRISIS, then there is no need for Finance Minister, Economic Affairs Minister and Finance Secretary fly often to Delhi to meet Indian FM to increase the line of credit, or sanction the grants sooner. Does this hold parallel interpretation? Otherwise it is my personal view on this too.

  12. ProOl, we meet here again! I have no quarrel with you. But can you please define ‘crisis’ for me since I’m still wet behind the ears? What would you call what we are facing now, especially the commonest people, if it is not a crisis? I’m too lazy to open the heavy Oxford dictionary to look for crisis in the Queen’s English. Thank you.

  13. Government should be urged to stop some of thier project like Mangdechu Hydropower Project, till those like PunaTsangChu Project begins to make money.

    This should be first priority.

    I think, we all, including Your Excellency yourself, should help government solve this issue for now. The accountability should be sought later

  14. Don’t worry , rupee crisis will be over once everything is banned in the country, they are already starting super Tuesdays, ignoring the populations needs, just ban ban ban.


  16. Dear Atta Yongba KT,

    Please do not let my comments put your nose out of joint. I did not say you were wet-behind-the-ears … I said you were sounding like one. The point I was trying to make was that it is not possible that Professor Joseph Stiglitz and other eminent speakers would say something contrary to the real situation.

    As to the definition of “crisis”, depends on what you are referring to. We are always in the middle of one crisis or the other. But problems don’t get solved simply by pointing them out and sitting back smugly. Talk is easy. Do something about it, show the way, put your money where your mouth is.

  17. DAMN…..Sell those dollars ……because of hoarding these dollars in an “Unplugged refrigerator” has accelerated this crunch. Use some of those money to feed good food to our boarding students because what we cannot solve may be solved by these new breed of generations….For betterment of future we have to feed them well now….otherwise they will exactly be like us depending on others for everything from eating to shitting…..we cannot even built our own toilets today but we can stir others to achieve GNH abroad and fail ourselves miserably by even not able to provide a nutritional diet to our children.

  18. I know I’m dumb, I know my nose is out of joint and let me tell you even my backside is out of joint! Does that make any happier, ProOl? The banks stopped loaning money, our people can’t buy a nail without rupee, construction works are facing cost overruns, travelers in India can’t buy even tea and some biscuits without rupee forget other essentials like brooms, toiletries from across the border! You guessed it right! That is the crisis the people wet behind the ears are facing now as I write this! This wasn’t the case 4 months ago. I don’t know who you are but whoever you are, I can tell, you are one of those rich and fortunate guys who isn’t affected and don’t realize what the drivers, the peons, the guards, the caretakers and their families are going through or you just don’t care. And I have to put my money in the food that has to go through the mouth! Well keep on advocating the intelligence and the wisdom of the imported experts, if you will, but I feel ridiculous to ask the experts why the European and the US economy could not be salvaged by them, the Buddha and the Christ of economy! Between hypothesis, theory and field application of ideas, as we all know, are a different story. Otherwise, why bother, we could just copy and paste them up!

  19. My Dear Atta Yongba KT,

    I already warned you of the dangers of getting your nose out of joint. Now see how illogical you have become. Come, come now you can do lot better than this. After all, you have the benefit of age, experience and wisdom behind you. You are not really the wet-behind-the-ears kid that you are beginning to sound like.

    You say the banks have stopped loaning money. Is that bad? It is very, very good. You know why? Let me explain to you in very basic language:

    a. The management of some banks have been giving out loan simply because they earn lots and lots of interest that improve their annual balance sheets. When they make huge profits, they can pay out huge dividends to their shareholders. When they do that, the shareholders think the management team it fantastic. So they are allowed to do whatever they do, even when there is huge scandal in the banks, the management is safe and no action is taken. The banks keep rotting from within, the management becomes more and more bold and they continue to give out bad loans that one day will catch up with them. When that happens, it will be the depositors who will suffer. The banks will collapse and along with them huge number of people who have been mislead into a false sense of affluence.

    b. The easy availability of money meant that people spent without really caring if they could afford to spend. The net result is that people paid for lands 20-30 times their worth. This has created unrealistic price hikes for land. Land became beyond the reach of the common man. The banks became irresponsible and lent loans up to 100% of the construction cost, in the process, leaving themselves wide open for default. People built inappropriate buildings that became out of reach of the common man. As a result, Thimphu is full of buildings that cannot be afforded by the common people. This means that over time, even the land and building owners themselves will not be able to afford them. Result: collapse.

    Because money was available freely and without any difficulty, it created a construction boom. People who otherwise could not have afforded a ramshackle Bago started to build multi-storied buildings. This generated a huge demand for Indian Rupees because we import everything from India. We imported a hunge number of skilled Indian workers who repatriated huge sums of money back home. That helped escalate our Rupee problem.

    You say our troubles started 4 months back? You got to be kidding. Or you have lost your sense of reality. I truly cannot believe that you think so. However, just incase you really, really think that our troubles started 4 months back, let me tell you that our troubles started some five decades back. What is happening now is simply this: we are beginning to do something about our troubles that have long been swept under the carpet. If you are a responsible person that I believe you are, then you have to admit that NOW is as good a time as any to tighten our belts and take action.

    If you had the good fortune to have been able to live in a fools paradise for so long, then it is right that you should also have the fortitude to live in and survive the natural outcome of your past irresponsibilities. As an intelligent person, it is your duty to understand that we need to do this or be lost forever.

    As to me being a rich person, trust me I am not. However, even if it were true, you ought to know that the scale of trouble is proportionate to your level of affluence. In simple words, a peon’s need is only Nu.5,000.00. By contrast, a rich man’s need is Nu.500,000.00. So while the peon will suffer for want to Rs.5,000.00 a rich man needs so much more. Therefore, while the scale of crisis may not be the same, the impact is the same.

    Contrary to what you say, I care. That is why I am willing to forego lots of things and take every trouble I am required to take so that we can begin the journey of recovery.

    Buddha and Christ fail because their flocks are a lost lot.

  20. gachibewmo says

    No peon or driver is complaining. It is only rich, spoilt, ‘had every thing,want every thing,know every thing’ people who are complaining.

  21. On sundays, no one would be allowed to leave their homes… it is a ban… it will save money and environment… On mondays, no one in Bhutan will be allowed to use toilets, anywhere… it will save money and environment…lol On Wednesdays, couples are not allowed to make love… to help save money, energy and environment…

  22. Bank’s happy-go-lucky action in the past no doubt contributed to this rupee shortage compelling the RMA into going for this drastic nationally imposed loan embargo. I think the ProOL’s statement relating to the banks has all the truth in why the spoilt Bhutanese banks are to be blamed and penalized for their lapses. But, the larger question that escapes our reasoning is why a straight away banking reforms exercise couldn’t be instituted by way of reshuffles of CEO and other corrective measures? If the past banks have failed, then, knowingly, why did the RMA approve two more private banks few years back? What will the world think of this blanket loan banning policy if two years after its opening, these new banks together with the old ones have to close their credit doors to the public? I think somewhere things not working right. Okay, if construction and other transport loans were a concern, then, what about other smaller loans like consumer, education and employee loans which largely benefit the people at the lower section of our society? Why have these loans also been closed under this RMA’s blanket ban?

    Like Karma Tenzin here, people’s anger seems mounting with each passing day and whether or not we believe this reality story, this is unfortunately the truth which has been harbored as the commonly shared feelings amongst the people.

  23. There are many scary stories about banks in Bhutan which if people/outside investors come to know about it, Bhutan’s stable image would vanish at once. CEO, one in particular, is surviving after all the wrong decisions because if he goes down he can bring down most Bhutanese elits. Huge sums of money were lent with no repayments from the borrower! There is only one hope for Bhutan. New political party from middle class is what we need to get rid of the current bhutan run by few elites who help each other.

  24. Paro,
    I am slowly beginning to incline more towards your line of thinking. I see lot of a substance in what you were trying to drive home the point, but, on a hindsight, I think, we would only regret in the rush decisions that we take in haste or under some situations. If it had not been our farsighted beloved Kings and our PM’s leadership, Bhutan today under our mistakenly appointed leaders deserves rethinking along your lines of perspicacity. I know you must have directed these messages in the hope that some changes would be forthcoming for the greater common good. Let’s hope, things would change for better.

  25. Jamyang,

    You probably don’t belong to the elite. I do although indirectly. One day you and others will see what I and people inside the elite circle see currently. The whole is too big. I hope I am wrong for the sake of this country that has many good things going on. Bhutan survived and still do because of our Kings. Please don’t include PM in the same line as our Kings. It is an insult to our kings.

  26. Paro,

    Is it a crime in expressing one’s true appreciation to a person, who, in your own evaluation, has been found working selflessly harder with some extraordinary amount of vigor and passion largely in a bid to fulfilling the noble dreams of our beloved Kings? I am surprised you got this message in a conveniently twisted negative light. But, nonetheless, we have one thing in common and that’s undoubtedly the Bhutanese elite’s naughty games issue. On this, you will have my support based on the reasonability ambit of the game. No doubt, our PM too comes from the elite camp, but, my conviction has it that in order to fixing such high powered tough elite wayward cases, only equally built person is the need of the hour into bringing the house in order. And in our PM, I have a strong feeling that he can take on the mantle. I could be wrong, but, that’s something which remains to be seen.

  27. guardian says

    I agree with Prool 100%, the banks and other financial institutions like the National Pension Fund and RICBLs desire to maximize profits has led to the present crisis we are facing. In future whatever the banks or the RMA does will not solve the rupee crisis, because as soon as Rupees are made available, there will be a group of people that will begin to hoard it, a classic case of “once bitten twice shy”.

    I wonder when the housing bubble is going to burst, as of now, there are no reports of any mass default of payments on earlier loans, but once the floodgates open, I wonder where it will end.

  28. I think it was irresponsible on the part of Stiglitz and the UNDESA to pronounce that the rupee problem is because of mismanagement of the reserves by RMA. Even a famous economist like Stiglitz should not be offering advice without doing a more in depth analysis.

    Selling US dollars for rupees is a short term solution that will only address the symptoms and not the causes of the problem. Had they cared to look a little deeper they would have realized that Bhutan’s dollar reserves has been built up through loans and grants and not from exports. Besides a couple of million from tourism every year, we have no other source of dollar earnings. Therefore, if we use it to pay for our imports from India it will be finished very soon and then what would they suggest we do. How will we pay our dollar debts?

    I expected them to come up with a proper analysis of the causes of the problem and recommend appropriate remedial policies. I couldn’t help but feel that their ‘analysis’ and findings were driven more by their desire not to blemish their cozy relationship with the powers that be than by hard facts and figures.

  29. Jamyang,Give me one example of how JYT’s action (selfless like you said) has helped this country. Please give tangible examples, not soft examples. Did he and his party introduce any laws that changed the lives of the Bhutanese for good? Do you know how much he and his family are worth and how they accumulated wealth. In life, one can get truc picture when one follows the money – money trail gives an interesting look at what someone is made of. It bothers me more than other to know the truth because knowingly I don’t do anything about it. In fact, I lunch and laugh with these people on regular basic. I sometimes feel bad about where my father’s money come from.

  30. Paro wrote: “I sometimes feel bad about where my father’s money come from.”


    If you feel bad and guilty about your father’s ill-gotten wealth, then, probably you must let JYT do the peccadillo decontamination job with least interruptions. If you keep asking me to explain every single word of my submissions here into getting a better meaning of the terms like selfless, competent, industrious etc. Then, in that case, I would rather suggest you to reverse you journey four years back to 2008 and prove to me on why not a single activity of the JYT government’s achievements thus far qualifies to be termed as the “selfless job” when viewed characteristically from the critical lenses of Paro .

    By selfless, do you want the JYT to be seen taking a suicidal jump off the cliff and finishing his life.

    Howsoever hard you try into painting this make-believe dark picture of the JYT and his family, I think, in the end, the Bhutanese public themselves will give the final ruling on the judgment day which is nearing. Until then, let’s wait and see.

  31. From the June 12 Issue of KUENSEL:

    Lapses in following rule of law

    Sarpang district court pulls up concerned authorities for failing to follow due process

    Gelephu BNB Case: With the judgment on June 8, in relation to the embezzlement of Nu 11.95M from Gelephu Bhutan National Bank branch, the Sarpang district court issued several observations and directives.
    They were meant for authorities, the court felt, failed to follow the rule of law.
    The former Gelephu superintendent of police, Karma Tshering, had detained the bank’s risk officer, Sangay Dorji, and its banking officer, Monrath Acharya, for a day and let them off, after they refunded the entire amount.
    In the judgment was a question, asking if a police officer could negotiate the matter that is brought before him to investigate; and if a bank could withdraw the complaint filed against the defendants.
    The judgment cited section 161.3 of the Criminal Procedure Code that mandated the police officer to make preliminary investigation following a criminal complaint; besides, section 41(c) of the Police Act, also mandates the officer to take lawful measures to investigate, charge and prosecute in the subsequent proceedings.
    “Why then did the officer allow the matter to be withdrawn, when it was a prima facie case, and a crime against the state?” the court verdict stated, adding the prosecutor also failed to prosecute the police officer in question.
    “The action of the police officer defied the rule of law, and undermined the true colour of the uniform, meant to uphold the law of the land, and seriously demeaned the RBP’s institution,” the court verdict said.
    The court pointed out that, if the law-enforcing agency deviated from the well-intended constitutional thoughts, hopes for the people to consider them as the protector of the law were nullified.
    “Laws are produced from Parliament, and not intended to be applied at the convenience of an individual police officer,” it said.
    As per the procedure code, any offence above misdemeanour is to be prosecuted only by the office of the attorney general.
    “The withdrawal of the prosecution is a constitutional tool allotted to the attorney general, and no other state agency can withdraw the crime committed against the state,” the court verdict said.
    The judgment stated the argument of the appellant that the withdrawal of the complaint by the bank constituted plea bargain could not be entertained, for lack of qualified reasons to construe police as the prosecutor at that particular time.
    The statement, Karma Tshering submitted to the court on December 21, 2010 confirmed the police had not investigated the matter, as required under the criminal procedure code.
    “The principle of plea bargaining will only be applicable on completion of police investigation,” the ruling said, adding the other was through an agreement that the accused would provide information to the prosecutor, in lieu of full criminal trial.
    “The nature of arrangement between the appellant, police and the bank not only undermined the law of the land, but it was a contemptuous approach the parties adopted,” the verdict read.
    After the defendants agreed to refund the embezzled amount, they were released, and the case withdrawn from Gelephu police, before they were re-arrested on December 25, 2010 by a special police team from Thimphu.
    The court also noted that OAG had failed to charge the bank for abusing commercial law.
    It sanctioned loans of Nu 2.5M without valid legal documents to third parties – a local contractor Kinley Wangdi and Pema Tenzin.
    The prosecutor, it said, committed an act of omission for not considering the crime of higher degree.
    “The money belonging to individual account holders and shareholders was disbursed at the convenience of the employee,” the court observed. “The management of the bank must make the responsible division accountable for such lapses.”
    The objective of the prosecutor, the ruling said, must be to assist the court to arrive at the truth, according to the law and the dictates of fairness.
    While doing so, it is equally important to observe whether the matter brought before it is prosecutable or not.
    The attorney general’s office, it said, never moved the court for the arrest and detention of co-defendants, Passang Tamang, Namgay Dorji and Phuntsho Tobgay, who were found guilty of aiding and abetting the crime.
    “The involvement of co-defendants, and the benefits accrued by them, through the illegal execution of the documents, warrants to be charged under commercial fraud,” the court ruling said, pointing at how the prosecutor conveniently accepted those documents as circumstantial evidence, and submitted to the trial court, instead of detaining them.
    “If the intention of the prosecutor is to proceed with a trial without detaining defendants, the court is not there to move its own motion, necessitating the defendants to be detained,” the judgment stated.

    By Rinzin Wangchuk

    Let’s watch this episode closely and see how far it takes us from here on.

  32. guardian says

    Another way to ease the rupee crunch sis to ban foreign travel for our cvil servants, allow immediately, funny how the task force and our people at RMA never even mentioned it.

    Is it becasue a blanket ban on tours abroad would also affect them.

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