World Bank Group Works with Bhutan to Improve Investment Climate and Fiscal Sustainability

June 18, 2015

Thimphu, June 18, 2015 — The World Bank Group this week approved a development policy credit of $20 million for Bhutan, in order to build on the country’s success through improving its investment climate and fiscal balance, which will help realize Bhutan’s goals of green socio-economic development and self-reliance.

Bhutan has had an impressive poverty reduction and economic growth record over the past decade. At the same time, high levels of investment in the hydroelectric infrastructure has increased pressures on the country’s fiscal balance and external accounts. This first of a series of two policy credits will help encourage fiscal balance, while promoting the country’s private sector development to diversify the economy and boost employment opportunities.

“Bhutan’s record of poverty reduction, shared prosperity and gender equality is strong. To build on the country’s successes, we are excited to work with Bhutan to address current challenges.” said Genevieve Boyreau, the World Bank’s Country Representative for Bhutan. “Through thoughtful and well-executed policies that strengthen fiscal sustainability, increase access to credit, and support improvements in the business climate, Bhutan has a strong opportunity to realize its development aspirations.”

These reforms will help reduce Bhutan’s fiscal deficit to less than 3% of GDP, reduce the number of day it takes to start a business from 32 days to 15 days, facilitate partnerships between the public and private sector, while increasing opportunities for foreign direct investment by 50% by 2017.

The World Bank strategy in Bhutan focuses on improving rural livelihoods and managing urbanization while protecting its natural assets. It has currently committed $191 million in concessional development credits, a number of technical assistance grants and analytical work for these areas to improve fiscal and spending efficiency, fostering private sector growth and competitiveness and supporting green development.

The development policy series will be funded by credit from the International Development Association (IDA) – the World Bank’s concessionary lending arm with a maturity of 25 years, including a 5 year grace period. 

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