Contradicting talks about rising inflation, retail business not doing well or decreasing disposable income, available statistics show a different trend.
Going by the increasing import bill, consumption has not slowed down even amidst dwindling convertible currency reserves and rising inflation.
Bhutan imports almost everything, even electricity during winter. The import bill is ballooning. It was worth Nu 66.64 billion (B) in 2020, Nu 90.23B as of 2021 and Nu 93.03B as of September last year (latest available data).
The projected bill is Nu 125.3B in 2022. To put into context, the total grant committed by the Government of India for the entire 12th Plan is Nu 50B.
Bhutan’s annual imports of goods has averaged at Nu 75B against exports of Nu 48B over the last five years.
As the Ngultrum or BTN is legal tender only within the country, all imports are paid in INR or USD both of which are in decline.
Statistics show that the country’s foreign currency reserve position of USD 1.49B in December 2020 has declined by 40 percent in December 2021.
This further declined to USD 773.2 million (M) in November last year, able to meet the requirement of 13.9 months of the country’s essential imports.
Latest figures are not available, but some who are aware say it is in a “critical position.” The government revised the 12 months’ essential import requirement value of USD 668M in 2017 to USD 603M for the normal period and USD 464M under the critical period from February this year.
The country’s foreign currency reserves have been largely built through grants and constitutional borrowings at 26 percent, hydropower exports recorded at 14 percent and tourism receipts at 12 percent over the years.
What are we importing?
While fuel remains the largest import item, growing consumerism too could be attributed to the huge import bill contributing to the negative balance of trade. According to the Bhutan Trade Statistics, Bhutan imported fuel worth Nu 8.35B in 2021. It was worth Nu 6.25B in 2020.
Vehicles including buses worth Nu 4.25B were imported from India and Nu 462.6 million (M) from other countries in 2021. Vehicle import from India nearly doubled in just one year. It was Nu 2.59B in 2020.
While import of vehicles from third countries saw a decline, the government had to stop the import of select vehicles from India and other countries to save the country’s falling foreign currency reserve.
Apart from essentials, furniture (metal, plastics, and wood) worth Nu 357.3M were imported as of September last year – Nu 178.87M worth from India and Nu 178.43M from other countries. Imports were lower in 2021 because of the restrictions imposed by the Covid-19 pandemic. In 2021, furniture imports from third countries were only worth Nu 81.83M.
Bhutan imported clothing worth Nu 518.38M in 2021. As of September 2022, the bill hadtouched Nu 468.77M indicating an increase.
Import of mobile phones is also on the rise with phones worth Nu1.4B imported as of September 2022. In 2020, total imports were worth Nu 1.6B.
With the private sector managing to open stores of branded clothing and footwear, exploring newer business destinations to cater to a growing taste for choice, import of footwear is on the rise. It was worth Nu 659.5M in 2021 with footwear worth Nu 172.49M imported from other countries. In 2020, the footwear and its related products were at Nu 282.71M.
Rice-eating Bhutan also imported pasta worth Nu 575.44M in 2021, from Nu 468.13M worth the previous year.
Meanwhile, if growing credit is pushing the country’s import bill, the increase is significant. Figures from the Royal Monetary Authority show that credit to the trade and commerce sector grew by 11.43 percent in just a year.
Credit to the housing sector, over 80 percent of which is used to import materials, increased to Nu 48.66M as of June 2022 from Nu 44.91B in June 2021.
Loans to the transport sector, mostly to import passenger vehicles, increased from Nu 6.72B in June 2021 to Nu 7.48B in June 2022.
According to NSB, the estimates of gross domestic product in 2021 show household consumption expenditure increase to Nu 95.69B in 2021, an increase of Nu 8.49B from 2020.
Household spending is the amount of final consumption expenditure resident households make to meet everyday needs like food, clothing, house (rent), energy, transport, durable goods (especially cars), health costs, leisure, and others.
Spending on food and non-alcoholic beverages, which accounts for 37.12 percent of the household spending, increased to Nu 35.52B in 2021 compared to Nu 32.33B in 2020.
Alcoholic beverages, tobacco, and narcotics spending rose by about 9.2 percent in 2021 to Nu 2.91B.
In the midst of ballooning imports and increased spending, inflation increased by 5.64 percent in 2022 from 2021. Food prices contributed to about 34 percent and non-food contributed 66 percent for the overall inflation increase.