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Current account deficit to improve by more than 35% in 2023-24
Thupten Sangpo
According to the Ministry of Finance’s third quarter macroeconomic performance and outlook report, the country’s current account deficit (CAD) is expected to improve by 37.14% or Ngultrum 30.16 billion in 2023-24 compared to the previous fiscal year.
The Canadian dollar is expected to increase from Ngultrum 81.2 billion in the 2022-23 fiscal year to Ngultrum 51.04 billion in the 2023-24 fiscal year.
CAD is a measure of a country’s trade, meaning the value of the goods and services it imports exceeds the value of the products it exports. It also includes net income (including interest and dividends) and transfers (such as foreign aid).
The improvement will be driven by increased hydropower exports, reduced imports, and inflows of budgetary subsidies from development partners.
Hydropower export revenue is expected to surge with the commissioning of the Nyekahu and Puna-2 hydropower plants.
The report said the country’s trade deficit increased to 15.12 billion Ngultrum in the first quarter of this year from 13.99 billion Ngultrum in the fourth quarter of 2023. This was mainly due to increased imports of motors and smartphones.
Although the recovery of the tourism industry has been slow compared to global trends, the Ministry of Finance expects tourist arrivals to reach 200,000 and 300,000 in 2024 and 2025 respectively, reaching pre-pandemic levels by 2026.
In 2023, Bhutan received 103,066 tourists, which is only 33% of the number of tourists in 2019. Among them, 72,659 were Indian nationals and 30,407 were of other nationalities.
Of the tourists who paid in US dollars, 5,814 paid the $65 Sustainable Development Fee (SDF), while 10,093 paid $200 SDF and 14,500 paid $100.
A total of 25,003 tourists visited Bhutan in the first quarter of this year, which is about 47% of the number of tourists in the same period of 2019.
On the other hand, revenue from electricity sales was Nu 25.17 billion last year, down 10% from the previous year. Domestic sales revenue increased by Nu 8.27 billion due to increased energy demand, while export revenue decreased to Nu 16.9 billion.
The power sector contributes an average of 13% to the country’s GDP, nearly 36% of total exports and 27% of domestic revenue.
Electricity sales are expected to be N27.82 billion this year and are expected to rise to N47.51 billion by 2025, mainly due to the commissioning of the first two Puna-II units in August this year and the remaining two units in December this year. With the commissioning of Puna-II, hydropower sales revenue will increase by 63%.
In the first quarter of this year, hydroelectric power generation totaled 919 million units, while the target generation was 940 million units. By the end of 2024, total generation is expected to reach 10,757 million units.
Gross international reserves are expected to rise to $891 million in 2024-25 from $624.11 million in June this year, mainly due to remittances, insurance, the Ngultrum 2.5 billion economic stimulus package, equity flows and an increase in currency and deposits.
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