ADB Lends $37 Million to Bhutan for Fiscal Sustainability, Green Recovery

MANILA  — The Asian Development Bank (ADB) has approved a $37.35 million policy-based loan to support Bhutan’s green and resilient economic recovery from the COVID-19 pandemic.

The budget support will fund the first subprogram of the Fiscal Sustainability and Green Recovery Program, which supports medium-term institutional and policy reforms to expand domestic resource mobilization; promote private sector development, especially cottage and small industries (CSIs); and introduce climate change adaptation and mitigation measures.

“The COVID-19 pandemic severely affected Bhutan’s economy, which had been performing well in the past 2 decades. Fiscal sustainability is critical to Bhutan as it recovers from the pandemic and aspires to become a high-income country by 2030,” said ADB Public Management Economist for South Asia Chandan Sapkota. “Through the program, government revenue will increase and expand the fiscal space for investments needed to achieve green, resilient, and inclusive development.”

Nearly 40% of economic activities in Bhutan, which rely heavily on hydropower to drive growth, are susceptible to climate change. The program will help lay Bhutan’s foundation for green recovery by supporting national adaptation plan, climate-resilient development strategy, and green finance.

The program will also help strengthen domestic resource mobilization, particularly through reforms in the areas of customs administration, tourism, a medium-term revenue strategy, and public financial management.

Business development in Bhutan is constrained by complicated processes, shortage of skilled workforce, low digitalization, reliance on state-owned enterprises, and limited access to finance. The program will support a range of reforms, including the streamlining of licensing procedures, promotion of business ventures, fiscal incentives for cottage and small industries, and market-responsive technical and vocational education and training.

A $1 million technical assistance has also been provided to support the implementation of policy actions, including the strengthening of executing and implementing agencies.

ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. Established in 1966, it is owned by 68 members—49 from the region.