Remittances from Bhutanese living abroad have seen a declining trend.
Statistics from the Royal Monetary Authority (RMA) show that Bhutan’s remittance inflow decreased by 2.5 percent to Nu 8.062 billion (B) in 2021 from Nu 8.27B in 2020.
However, it is more than the combined remittance in 2017, 2018, and 2019 at Nu 1.9B, Nu 3B, and Nu 2.9B, respectively.
Comparing January’s remittance to the same month last year, it fell by over 50 percent. This is mainly because of a decrease in the Australian dollar remittance.
The RMA’s statistics recorded a remittance of Nu 286.1 million (M), equivalent to USD 3.24M, in January this year. More than half of the remittances received in January this year were in USD, amounting to USD 2.05M equivalent to Nu 152.28M. One-third of remittances were from Australia—Nu 101.76M, equivalent to Australian dollar 1.9M.
In January last year, Bhutan received remittance of Nu 612.16M, of which Nu 427.74M was in Australian dollars.
A Bhutanese working in Perth, Australia, Kezang Tobgay, said that he sent money to support his parents during the lockdowns and also to purchase properties in 2020. However, he said that now more Bhutanese are looking for investment avenues in Australia, as it is cheaper than in Bhutan.
“Buying a house in Australia starts from Australian dollar 250,000, equivalent to Nu 13.7M. There are also other options for owning a home from AUD 250 (Nu 13,700) to AUD 500 (Nu 27,400) a week,” Kezang Tobgay said. However, according to the central bank’s regulations relating to the possession of assets and properties outside Bhutan by Bhutanese citizens 1993, “Bhutanese citizens, firms, and companies registered or incorporated in Bhutan are not permitted to acquire or hold any immovable property situated outside the territory of Bhutan except with specific permission from finance ministry.”
The regulation adds that the contravention of any provisions of these regulations, or any rule, directive or order issued pursuant to these regulations shall be punishable with imprisonment for a term which may extend up to two years or a final equal to the value of the amount involved in the contravention.
A realtor based in Thimphu said that in recent years the price of the land and properties has increased drastically.
He said that a decimal of land in the core Thimphu town costs between Nu 7M and 8M. While in the periphery of Thimphu Thromde, near the expressway, it costs between Nu 1M and 2M, he added.
To buy 10 decimal of land, it would cost Nu 20M which is more expensive compared to buying a house in Australia. A flat in Thimphu core town area costs Nu 6M, a realtor said.
In an earlier interview, chief executive officer of Yala Real Estate, Kinzang Lhendup, said that up to 90 percent of the property buyers are Bhutanese living in Australia and 10 percent are from the United States of America.
A Bhutanese in Australia, Tshering, said that recently his brother got an opportunity to come to Australia and he paid for his brother’s tuition fee and health insurance, among others. He added that the Bhutanese might also be waiting for the Australian dollar to Ngultrum appreciate. The Australian dollar against Ngultrum depreciated to 53.56 in January this year compared to 56.95 in the same month last year.
Kezang Tobgay also said that many Bhutanese coming to Australia exchange Ngultrum with the Australian dollar, thus skipping transactions through banks.
Remittance helps improve the foreign exchange reserves and reduces deficit in the current account by improving the country’s balance of payments. The country lost foreign currency earning capacity because of the pandemic. Before the pandemic, the country’s tourism sector earned USD 88.65M in foreign exchange earnings and USD 23.42M from the sustainable development fee (SDF) in 2019.
An observer said that imposition of the SDF from USD 65 to USD 200 per tourist per night could lead to a decrease in tourist arrivals.
“If few tourist come, there will be a decline in the hard currency earnings capacity of the country, since the country’s exports are negligible,” he added.
Rough estimates indicate that there are 50,000 Bhutanese ready to leave for Australia. Observer said that if more Bhutanese go outside, they would pull their families and relatives abroad which could lead to decline in remittance.
Remittance also helps build foreign currency reserves. As per the RMA, the convertible currencies (CC) reserves in April last year was recorded at USD 1.145B. It declined to USD 828.9M as of December last year.
An observer said that declining CC reserves is a vulnerable sign for the economy, which would disturb the macro-economic stability of the country and volatility to the economic shocks. According to the finance ministry, Bhutan’s gross international reserves was estimated to drop to USD 1.33B this fiscal year from USD 1.56B in the previous fiscal year.
The total reserves would be sufficient to finance 22 months of essential imports which is more than mandated by the Constitution.
The Constitution mandates that the country should maintain a minimum foreign currency reserve adequate to meet the cost of not less than one year’s essential import.
However, the finance ministry has warned that the declining reserves trend with no new investments generating foreign exchange earnings could affect the pegged exchange rate regime.