Kuensel | Thukten Zangpo | August 10, 2024
Current account deficit to improve by over 35 percent in FY 2023-24
The country’s current account deficit (CAD) is estimated to improve by 37.14 percent or Nu 30.16 billion in the fiscal year 2023-24 compared to the previous fiscal year, according to the finance ministry’s third quarter macro-economic performance and outlook report.
The CAD is estimated to improve from Nu 81.2 billion in fiscal year 2022-23 to Nu 51.04 billion in fiscal year 2023-24.
The CAD is a measurement of a country’s trade where the value of goods and services it imports exceeds the value of products it exports. It also includes net income, including interest and dividends, and transfers, like foreign aid.
This improvement will be driven by higher hydropower exports, lower imports, and inflow of budgetary grants from development partners.
The hydropower export revenue is expected to surge with the commissioning of Nikachhu and Puna-II hydropower plants.
According to the report, the country’s trade deficit increased to Nu 15.12 billion in the first quarter of this year, up from Nu 13.99 billion in the fourth quarter of 2023. This was mainly driven by an increase in imports of electrical machinery and smartphones.
Although the tourism sector’s recovery has been slow compared to global trends, the finance ministry projects 200,000 and 300,000 arrivals in 2024 and 2025 respectively, and reaching the pre-pandemic level by 2026.
Bhutan received 103,066 tourists in 2023, which is only 33 percent of tourist arrival in 2019. Of this, 72,659 were Indian nationals and 30,407 of other nationalities.
Among the USD paying tourists, 5,814 individuals arrived on a sustainable development fee (SDF) of USD 65, while 10,093 individuals paid SDF of USD 200 and 14,500 paid USD 100.
In the first quarter this year, 25,003 tourists visited Bhutan, which is about 47 percent of the 2019 arrival in the same period last year.
On the other hand, electricity sales earned Nu 25.17 billion last year, a 10 percent drop from the previous year. The export earnings declined to Nu 16.9 billion because of increased domestic sales of Nu 8.27 billion with higher energy demand.
The electricity sector contributes 13 percent to the country’s GDP on average, accounting for nearly 36 percent of the total exports and 27 percent of domestic revenue.
Electricity sales this year is estimated at Nu 27.82 billion, which is projected to increase to Nu 47.51 billion in 2025, mainly because of commissioning of two units of Puna-II by August and remaining two by December this year. With the commissioning of Puna-II, hydro energy sales earnings will increase by 63 percent.
In the first quarter this year, the total hydropower generation stood at 919 million units against the target generation of 940 million units. By the end of 2024, a total generation of 10,757 million units is estimated.
The gross international reserve is expected to improve from USD 624.11 million as of June this year to USD 891 million in the fiscal year 2024-25, mainly driven by higher inflow of remittance, insurance, Nu 2.5 billion economic stimulus programme, equity flows, and currency and deposits.
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