Economy of Bhutan

In 1990-99, the annual growth rate of GDP per capita was 3.4%, in 2000 – 5.7%, in 2001 and 2002 – 6%. GDP in 2000 0.5 billion US dollars (according to the purchasing power parity of the currency – 1.1 billion US dollars, per capita income 1412 dollars).

According to cheeroutdoor, the economically active population is 69.7% (among women 57.1%) (2000). The share of the unemployed is 1.4%. In 1990-99, the average annual increase in prices for consumer goods was 9.6%; in 2000, 4.2%; in 2001, 3.2%; and in 2002, 2.3%.

Agriculture remains the leading sector of the economy, employing more than 90% of the population. It accounts for (2000) 32.3% of GDP (in 1995 39.6%). More than 300 thousand hectares are cultivated, more than 250 thousand hectares are occupied by pastures. The main crops are rice, wheat, barley, millet, corn, potatoes, mustard, mango, citrus fruits. Animal husbandry is developed, a large amount of dairy products and eggs are produced. The authorities are trying to preserve small farming (5-25 acres): it is forbidden to own land exceeding 25 acres, and to sell the land if there are less than 5 acres left per family.

The manufacturing industry is underdeveloped. Main industries: cement, woodworking, food. It accounts for (2000) 9.9% of GDP. Only 38 enterprises employed more than 50 workers. Mostly handicraft production. The Government’s greatest income comes from hydropower generation, the fastest growing sector of the economy and the bulk of its exports. More than 1.8 billion kWh of energy was generated (2000). The structure of GDP (2000): energy 12.6%, construction 12.1%, transport 10.1%, social and personal services 8.2%, trade, restaurant and hotel business 7%. The number of tourists did not exceed 10 thousand per year (the income from their stay is estimated at 10 million dollars per year).

The length of motor roads is more than 3.7 thousand km (paved about 2 thousand km); railways – no; 2 airports (with concrete runways – 1) (2002).

Bhutan has made some progress in recent years in expanding its productive base (primarily with India’s aid) and improving social security. Various educational, social and environmental programs are being implemented with the help of international development organizations. Economic programs are accepted only if they do not damage the environment and cultural traditions. The volume of foreign investment is low due to continued state control; uncertain policy in the field of industrial licensing, trade and finance; shortage of qualified personnel.

The Central Bank of Bhutan is the Royal Monetary Authority established in 1982. The Chairman of the Board is the Minister of Finance. Board members are appointed by the government. The institution is responsible for economic, financial and price stability, acts as a government banker, provides funds to other financial institutions, and establishes control over the exchange rate. The only commercial bank is the Bank of Bhutan (23 branches), most of the shares are owned by the government. Some shares of the Royal Bhutan Insurance Corporation are in private hands. The Bhutan Development Finance Corporation was established in 1988 to assist small and medium producers of industrial and agricultural products.

Foreign exchange reserves were estimated at 316 billion ngultrums (2003).

Private consumption is 53.4% of GDP (1999), government spending – 19.7% (income – 11.9%). Government revenues are almost equally derived from taxes and dividends and revenues from state-owned enterprises. A significant part of government spending is carried out through external financing. Public spending on education and health care amounted to 4.1% and 3.2% of GDP, respectively. The main external assistance is provided free of charge (official development assistance exceeded 10% of GDP in 2000), and 4.6% of GDP was used to service external debt ($310 million) (2002). The main donor on a bilateral basis is India. In 2002/03 she provided gratuitous assistance in the amount of approx. $30 million. For the implementation of the 8th five-year plan (1997-2002), India allocated 9 billion ngultrums.

According to the national methodology, the poor (income less than 65 cents a day) account for 36.3%. 40% of children under the age of 5 are chronically malnourished. Bhutan ranks only 140th in the Human Development Index in the United Nations Development Program classification – 0.494 (2000).

In 2000/01, the volume of foreign trade amounted to approx. 14 billion ngultrums. Exports (5.2 billion) are significantly inferior to imports. India is constantly the main trading partner (78.7% of Bhutan’s imports and 94.4% of its exports). The main exports are electricity, cardamom, gypsum, calcium carbide, timber, cement, fruits, gems, and spices. The most important imports are fuels and lubricants, grains, rice, machinery and spare parts, vehicles, textiles, and everyday goods.

Economy of Bhutan