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Bhutan discusses defences against global financial crises

20 December 2009

Bhutan will suffer more from external crises. However, the country has no choice but to integrate into the world economic system. It is critical for the country to draw lessons from recent events and experiences of other countries in order to be prepared for the future, Lyonpo Yeshey Zimba said.

As the world recovers from the global economic shocks, there is a need to share experiences in the implementation of monetary, fiscal and external debt policies in Bhutan and other countries in the region, not only in response to the current global financial crisis, but also to bolster defences against future crises.

To address this issue, a three-day national workshop was held last week in Thimphu. The workshop allowed policy-makers from Bhutan, Bangladesh, India, Pakistan and Thailand to learn from one another’s experiences and to identify best practice areas for future cooperation.

The participants agreed on the need for technical cooperation that would help bolster Bhutan’s defences against future financial and economic crises.

Participants discussed Bhutan’s plans to develop markets for treasury bills, which will provide a benchmark interest rate to guide the setting of deposit and lending rates.

Participants from India and Pakistan provided details on their countries’ experience in developing markets for government securities and in setting up repurchase agreements for the short-term control of liquidity.

A participant from Thailand explained how the country strengthened its supervision of the banking system after the crisis of 1997 and how such measures helped the country weather the impact of the global financial crisis of 2008.

Ways to increase fiscal revenues, which is at the moment a critical policy priority for Bhutan, was also discussed.

In assessing the impact of the crisis on Bhutan’s economy, the Managing Director of Royal Monetary Authority, Daw Tenzin, said the economy kept growing at a similar rate as the year before despite some loss in revenue in tourism and drops in output in some manufacturing industries.

However, he said the economy had shown some signs of stress, with the budget deficit, the current account deficit and the amount of money in circulation increasing significantly during 2009.

Nagesh Kumar, chief economist of UN Economic and Social Communication for Asia and Pacific (UN- ESCAP), said the region had to develop new sources of growth that would generate additional aggregate demand. With more than half of the world’s poor living in the Asia-Pacific, the region, he said, had the potential to add millions of new consumers. Poverty reduction should, therefore, occupy the centrestage of development policy, which included paying attention to agriculture and rural development, and strengthening social protection, among others.

UN Resident Coordinator and UNDP Resident Representative in Bhutan, Claire Van der Vaeren, said, “Social protection in Asia is very weak compared to Latin America and Eastern Europe and social transfers have been effective in both stimulating spending and protecting the poor from the worst effects of the crisis.”

The three-day high-level national workshop on ‘Strengthening the responses to the global financial crisis in Asia-Pacific: The role of monetary, fiscal and external debt policies’ was organised by the ESCAP and UNDP and hosted by RMA. It is part of ESCAP’s programme to assist member states to ‘build their capacity to make appropriate policy responses that mitigate the impact of the economic crisis, restore growth and avoid future global shocks”.

By Rabi C Dahal

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Posted by Bhutan Observer · Filed Under Economy, News 

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