𝐎𝐏𝐈𝐍𝐈𝐎𝐍 – 𝐓𝐡𝐞 𝐄𝐜𝐨𝐧𝐨𝐦𝐢𝐜 𝐌𝐢𝐫𝐚𝐠𝐞

Nearly a year has passed since the new government rolled out its Economic Stimulus Plan (ESP), a bold initiative intended to reignite the national economy by injecting much-needed financial support into businesses. The goal was clear: to help businesses weather the economic storm, pay off debts, and stimulate growth. However, as the first window of the ESP nears completion and the second window is prepared, it is becoming increasingly clear that the promised economic revival remains elusive.

The central aim of the ESP was to provide businesses, particularly small and medium-sized enterprises (SMEs), with the financial relief necessary to ease their debt burdens and resume operations. Yet, despite these promises, many businesses continue to report struggling. According to the Bhutan Chamber of Commerce and Industry (BCCI), over 30% of businesses are unable to meet their loan repayments, with many now classified as Non-Performing Loans (NPLs). This indicates that the ESP has not effectively reached the businesses that need it most. The financial pressures on SMEs remain unchanged, with many unable to access the relief they were promised.

The role of financial institutions in this crisis cannot be overlooked. While the government claims that the ESP is injecting capital into the economy, the reality is that many businesses are still burdened by high-interest rates and stringent loan terms. Financial institutions, which were supposed to support recovery, continue to profit, with some reporting growth rates of up to 15% and distributing dividends to shareholders. This contrast between the financial sector’s profitability and the struggles of businesses paints a troubling picture of an economy where the very institutions meant to facilitate recovery are thriving at the expense of others.

The disconnect between government promises and the lived reality of businesses is further compounded by the broader economic situation. Walk through any of the country’s towns and cities, and the impact of economic stagnation is clear. Once-vibrant marketplaces are now quiet. In cities like Thimphu, Phuentsholing, and Paro, vacant storefronts are becoming more common as small businesses close their doors. Rural areas, too, are feeling the pressure, with farmers and small traders struggling to stay afloat due to rising costs and limited access to credit. This loss of vibrancy in both urban and rural areas signals a deeper economic malaise.

Moreover, businesses are facing rising taxes at a time when they can least afford it. The government’s decision to increase taxes may be necessary to fund public services, but for businesses already struggling under the weight of debt and high-interest rates, these increases only exacerbate their financial distress. Instead of providing a boost to the economy, the tax hikes are making it harder for businesses to survive and recover.

As the first window of the ESP nears its end, there is little sign that the economy is on the mend. The second window is being prepared, but will it offer more of the same? The government must address the root causes of economic stagnation if it is to achieve its objectives. Financial relief alone will not resolve the issues facing businesses. What is needed are structural reforms that create an environment in which businesses can thrive. This includes reducing interest rates, improving access to credit, and making the regulatory environment more supportive of entrepreneurship.

The government must also address the role of financial institutions in this crisis. If the aim of the ESP is to provide relief to businesses, then financial institutions must play a more active role in facilitating recovery. This means lowering interest rates, offering more flexible loan terms, and prioritizing the broader economic health over short-term profits. The financial sector should not be allowed to thrive while businesses that fuel the economy continue to struggle.

Furthermore, the government must focus on creating a business-friendly environment. The high costs of doing business, including taxes and interest rates, are major obstacles to recovery. The government must prioritize long-term solutions over short-term fixes, focusing on reducing the cost of doing business and improving access to capital. Without these changes, businesses will continue to face significant challenges in returning to growth.

The government’s promises of economic revival through the ESP were ambitious, but nearly a year in, the results have been underwhelming. While the financial support provided under the ESP may have offered temporary relief, it has not been enough to address the deeper issues facing businesses. The government must take bold, decisive action to ensure that the ESP evolves into a program that not only offers immediate financial support but also facilitates long-term structural changes to the economy.

As the first window of the Economic Stimulus Plan (ESP) nears its close and the second window is being prepared, it is clear that the economic recovery promised by the government has yet to materialize. Businesses continue to struggle with high-interest rates, tax increases, and a lack of access to credit. While financial institutions report record profits, many businesses are on the brink of collapse. The government must reassess its approach to economic recovery and focus on long-term structural reforms that create a more supportive environment for business growth. Only then will the economy begin to recover, and the ESP will fulfill its promise of revitalizing the nation’s economy.

Thinley Dorji,Paro