Working with Bhutan to Improve Fiscal Sustainability, Access to Finance and Investment Climate

December 22, 2016

Thimphu, December 22, 2016 — The Board of Executive Directors of the World Bank approved the Second Fiscal Sustainability and Investment Climate Development Policy Credit (DPC2) of US$24 million for Bhutan on December 21, 2016. 

This is the second of two operations to support Bhutan’s Eleventh Five-Year Plan (2013–2018) goals of promoting green socio-economic development and achieving self-reliance. The operation will promote fiscal discipline, increase access to finance for enterprises, and improve the climate for business entry and investment in Bhutan. 

Bhutan has made impressive progress in poverty reduction and economic growth over the past decade. At the same time, high levels of investment in the hydropower sector have increased pressures on the country’s fiscal balance and external accounts.

“Bhutan’s record in reducing poverty and promoting shared prosperity is strong. A key challenge going forward is to put in place policies that will help private sector to grow and create more and better jobs,”
said Qimiao Fan, the World Bank’s Country Director for Bangladesh, Bhutan and Nepal. “Through thoughtful and well-executed policies that strengthen fiscal sustainability, increase access to credit, and improve the investment climate, Bhutan has a strong opportunity to realize its full development potential.”

The policy reforms supported by DPC2 are expected to reduce non-hydropower debt from 27 percent in FY2014/15 to below 25 percent of GDP in FY2017/18, increase the share of adult population having bank accounts from 34 percent in 2014 to 40 percent in 2017, and reduce the number of days required to start a business and transfer a property title to approximately 10 and 45 days respectively, by 2017/18.

“The Royal Government of Bhutan will be using the proposed operation to support institutional strengthening measures in some key areas, building on the momentum and lessons learnt from the past budget support operations to accelerate development in Bhutan,” said Namgay Dorji, the Royal Government of Bhutan’s Finance Minister.  

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. 

Media Contacts
In Thimphu
Yoichiro Ishihara
In Washington
Joe Qian