UN workshop seeks to bolster Bhutan’s defences against future global financial crises

A United Nations workshop in Bhutan concluded today, with participants agreeing on the need for technical cooperation projects that would help bolster the Himalayan kingdom’s defences against future financial and economic crises.

The three-day high-level national workshop on the implementation of monetary, fiscal, and external debt policies was organized by the Economic and Social Commission for Asia and the Pacific (ESCAP) and the United Nations Development Programme (UNDP) and hosted by the Royal Monetary Authority of Bhutan (RMA). It is part of ESCAP’s programme to assist member States “in building their capacity to make appropriate policy responses that mitigate the impact of the economic crisis, restore growth and avoid future global shocks.”

The workshop discussed the effective coordination of monetary, fiscal and debt management policies at the national and regional levels, and allowed policy-makers from Bhutan to learn from the experiences of Bangladesh, India, Pakistan and Thailand, and to identify best practices and areas for future cooperation.

Workshop participants discussed Bhutan’s plans to develop markets for Treasury Bills, which will provide a benchmark interest rate to guide the setting of deposit and lending rates. Participants from India and Pakistan provided details on their countries’ experience in developing markets for Government securities and in setting up repurchase agreements for the short-term control of liquidity.

A participant from Thailand explained how the country strengthened its supervision of the banking system after the crisis of 1997 and how such measures helped the country weather the impact of the global financial crisis of 2008.Workshop participants also discussed ways to increase fiscal revenues, which is at the moment a critical policy priority for Bhutan.

In the inaugural session, Lyonpo Yeshey Zimba, the Honourable Minister for Works and Human Settlement and the chief guest of the workshop, said, “As the economy modernizes, Bhutan will suffer more from external crises. However, the country has no choice but to integrate into the world economic system. It is critical for the country to draw lessons from recent events and from the experiences of other countries in order to be prepared for the future.”

In assessing the impact of the crisis on Bhutan’s economy, Daw Tenzin, Managing Director of the Royal Monetary Authority of Bhutan, noted that the economy kept growing at a similar rate as the year before, despite some loss in revenue in tourism and drops in output in some manufacturing industries. However, the economy has shown some signs of stress, with the budget deficit, the current account deficit and the amount of money in circulation increasing significantly during 2009.

Nagesh Kumar, ESCAP’s Chief Economist, emphasized that the region has to develop new sources of growth that will generate additional aggregate demand. With more than half of the world’s poor, the Asia-Pacific region has the potential to add millions of new consumers. Poverty reduction should therefore now occupy the centre stage of development policy, which includes paying attention to agriculture and rural development, and strengthening social protection, among other policies.

Claire Van der Vaeren, UN Resident Coordinator and UNDP Resident Representative in Bhutan, remarked that “social protection in Asia is very weak compared to Latin America and Eastern Europe and social transfers have been effective in both stimulating spending and protecting the poor from the worst effects of the crisis.”