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Tuesday, November 29, 2022

After Sri Lanka, Bhutan’s crisis risks are growing as foreign exchange reserves decline

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In an effort to preserve its diminishing foreign exchange reserves, Bhutan has decided to place a restriction on the import of all automobiles, with the exception of utility vehicles, large earthmoving machines, and agricultural machinery.

In order to conserve the country’s dwindling foreign exchange reserves, the government of Bhutan has announced in a notice that was seen by Reuters on Friday that it will prohibit the import of all vehicles, with the exception of utility vehicles, heavy earthmoving machines, and agricultural machinery.

The tiny nation, which has a population of less than 800,000 people and is located between China and India, is struggling to recover from the effects of skyrocketing oil and grain prices brought on by the conflict in Ukraine. Additionally, the nation is dealing with the ongoing effects of the pandemic, including a stringent zero-COVID policy that has banned foreign tourists for the past two years.

According to statistics that was made public by the Royal Monetary Authority of Bhutan a month ago, the country’s foreign exchange reserves dropped from $1.46 billion in April 2021 to $970 million at the end of December 2021. This was a significant reduction.

In a statement, the Ministry of Finance stated that the import of utility vehicles with a price tag of less than 1.5 million ngultrums ($20,000) would be permitted, and that cars that would be used for the purpose of promoting tourism would be excluded from the import tax.

According to what was written there, the restriction was put into place “to secure enough foreign currency reserves for the purpose of sustaining macroeconomic stability.”

According to the daily Kuensel newspaper, Bhutan imported almost 8,000 vehicles in the year leading up to June, and this was one of the primary contributing elements that resulted in the depletion of reserves.

According to its constitution, Bhutan is required to save sufficient reserves to cover at least one year’s worth of imports.

According to what was stated, the government would examine and perhaps change the ban that just went into force on Friday in six months depending on the situation of the foreign currency reserve.

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