𝐄𝐃𝐈𝐓𝐎𝐑𝐈𝐀𝐋- 𝐓𝐡𝐞 𝐏𝐫𝐨𝐦𝐢𝐬𝐞 𝐚𝐧𝐝 𝐂𝐡𝐚𝐥𝐥𝐞𝐧𝐠𝐞𝐬 𝐨𝐟 𝐭𝐡𝐞 𝟐𝟎𝟐𝟒 𝐄𝐜𝐨𝐧𝐨𝐦𝐢𝐜 𝐒𝐭𝐢𝐦𝐮𝐥𝐮𝐬 𝐏𝐫𝐨𝐠𝐫𝐚𝐦𝐦𝐞

The Economic Stimulus Programme (ESP) 2024, inaugurated on May 19, 2024, with a Nu 15 billion financial injection from the Government of India, marks a crucial phase in Bhutan’s ongoing efforts to revitalize its economy in the wake of the Covid-19 pandemic. With the pandemic having exposed the vulnerabilities of economies worldwide, Bhutan’s response through the ESP is a comprehensive attempt to enhance domestic production, generate employment, and move towards greater self-reliance. The guidelines for the implementation of the ESP Credit Lines, effective from August 7, 2024, offer a detailed blueprint for this ambitious initiative.

The programme’s dual-pronged approach to credit support is central to its potential success. By leveraging the nation’s financial institutions, the ESP aims to tackle two critical economic challenges: encouraging new entrepreneurial ventures and reinvigorating businesses distressed by the pandemic. The Concessional Credit Line (CCL) is a strategic measure targeting new and scaling businesses in sectors identified as pivotal for Bhutan’s economic growth. With an exceptionally low-interest rate of 4% per annum, the CCL removes a significant barrier to entrepreneurship- access to affordable credit. This, coupled with collateral-free loans backed by project assets where applicable, seeks to lower the entry threshold for aspiring entrepreneurs, fostering innovation and economic diversification.

However, the programme’s success in fostering sustainable businesses through the CCL hinges on the effectiveness of the project assessments conducted by Participating Financial Institutions (PFIs). Robust and diligent project evaluations are crucial to ensuring that only viable and impactful projects receive funding. This not only maximizes the programme’s positive economic impact but also safeguards the financial stability of both borrowers and lenders. The guidelines emphasize the need for PFIs to conduct thorough due diligence, working closely with government agencies for technical assessments. This collaborative approach aims to ensure that funded projects are built on solid foundations, capable of contributing to the broader economic recovery.

The second component, the Reinvigoration Fund (RGF), is designed to assist businesses that have the potential to rebound from the setbacks inflicted by the pandemic. Divided into two modalities interest subsidy and an additional loan with a subsidized interest rate- the RGF provides much-needed relief to businesses grappling with high debt burdens. By offering subsidized interest rates at 4% per annum, the RGF allows businesses to refocus on recovery and growth, rather than merely managing debt. The annual evaluation of RGF beneficiaries is a crucial aspect of this initiative, ensuring that the support provided is effective and that the resources are being allocated efficiently. The decision to offer either an interest subsidy or an additional loan rather than both ensures that the limited funds available are distributed to benefit as many viable businesses as possible.

While the structure of the ESP 2024 is promising, its success will largely depend on the effective monitoring and evaluation of the funded projects. PFIs are not only responsible for appraising and disbursing loans but must also engage in ongoing monitoring and recovery efforts. This requires a high level of coordination, accountability, and robust reporting mechanisms to track progress and address challenges as they arise.

Moreover, the programme’s impact will be influenced by the Royal Monetary Authority’s (RMA) ability to adapt the guidelines as necessary, ensuring that they remain responsive to the evolving economic landscape. Flexibility in revising the guidelines will be essential in addressing unforeseen challenges and capitalizing on new opportunities that may emerge during the programme’s implementation.