The Implications of the Depletions of Foreign Currency Reserves in Bhutan
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Published
Apr 25, 2023
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Abstract
A country should have enough foreign exchange reserves to guard against any potential external shocks. The study is exploratory and qualitative wherein the research uses secondary data from relevant sources to analyze the effects on the social and economic aspects of the depletion of the foreign exchange reserve in Bhutan in order to address the growing concerns over the pattern of the country’s foreign exchange reserves. The study concluded that Bhutan’s current trade deficit trend will have implications on its foreign reserve, including a ban on non-essential items and essential ones as an approach to saving depleting foreign reserves. Since the majority of essential items are imported, a complete ban on these items will cause a social and economic crisis and will have an impact on people’s ability to support themselves. There is a need for the policymakers and concerned authorities to leverage the export, tourism, remittances and FDIs sector which are the sources of foreign currency in Bhutan.
Keywords: Bhutan, Foreign Reserves, Trade Deficit, Export, Tourism, Remittances, FDIs
References
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Bhutan Today. (n.d.). DHI Projects to Earn Foreign Currency. Retrieved from http://www.bhutantoday.bt/dhi-projects-to-earn-foreign-currency/
Chaudhury, D. R. (2022, August 26). Rising Imports from China Draining Bhutan’s Forex Reserves. Retrieved from https://economictimes.indiatimes.com/news/international/rising-imports-from-china-draining-bhutans-forex-reserves/articleshow/93804399.cms?from=mdr
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Dolkar, D. (2022, June 22). Bhutan has Enough Foreign Currency Reserve: PM. Retrieved from https://kuenselonline.com/bhutan-has-enough-foreign-currency-reserve-pm/
Etsuyo, A. (2022, October 11). Sri Lanka’s Economic Crisis: A Chinese Debt Trap? Retrieved from https://www.nippon.com/en/in-depth/d00840/
Fukuda, S.-I., & Kon, Y. (2010). Macroeconomic Impacts of Foreign Exchange Reserve Accumulation: Theory and International Evidence, ADBI Working Paper, No. 197. Tokyo: Asian Development Bank Institute (ADBI). Retrieved from https://www.econstor.eu/handle/10419/53560
Gajurel, R. P. (2022). Determinants of Nepal’s Foreign Exchange Reserve: An Empirical Study. Journal of Management, 5(1), 76-98. https://doi.org/10.3126/jom.v5i1.47763
Human Right Watch. (2022, August 16). Sri Lanka: Economic Crisis Puts Rights in Peril. Retrieved from https://www.hrw.org/news/2022/08/16/sri-lanka-economic-crisis-puts-rights-peril
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Jha, H. B. (2022, May 2). Nepal’s Economic Crisis: Is Nepal the Next Sri Lanka? ORF. Retrieved from https://www.orfonline.org/expert-speak/nepals-economic-crisis/
Kaphle, R. R. (2021). Impact of Foreign Exchange Reserve on Economic Growth in Nepal. Journal of Management and Development Studies, 30(1), 14-23. https://doi.org/10.3126/jmds.v30i1.36347
Ministry of Finance. (2022). National Budget Financial Year 2022-23. Bhutan: Kuensel Corporation. Retrieved from https://www.mof.gov.bt/wp-content/uploads/2022/06/Budget-Report-for-FY-2022-23-in-English.pdf
Palden, T., & Zangpo, T. (2022, August 19). Govt. Suspends Import of Select Vehicles. Retrieved from https://kuenselonline.com/govt-suspends-import-of-select-vehicles/
Polterovich, V., & Popov, V. (2003). Accumulation of Foreign Exchange Reserves and Long Term Growth. Munich Personal RePEc Archive. Retrieved from https://mpra.ub.uni-muenchen.de/20069/
Royal Government of Bhutan, Ministry of Finance. (2022). Public Debt Situation Report for the Quarter-ended 30th June, 2022. Bhutan: Debt Management Division, Department of Macroeconomic Affairs. Retrieved from https://www.mof.gov.bt/wp-content/uploads/2022/08/PublicDebtSituationReport30_JUNE_2022.pdf
Royal Monetary Authority of Bhutan. (2021). Annual Report 2021. Bhutan: Royal Monetary Authority of Bhutan. Retrieved from https://www.rma.org.bt/RMA%20Publication/Annual%20Report/Annual%20Report%202020-2021-final.pdf
Sá, F. (2012). Chapter 4. Bilateral Financial Links. In G. Caprio (Ed.), The Evidence and Impact of Financial Globalization. Massachusetts, USA.: Academic Press. Retrieved from https://www.elsevier.com/books/the-evidence-and-impact-of-financial-globalization/caprio/978-0-12-397874-5
Sanghani, N. (2022, July 14). Sri Lanka Crisis Shows Why Reserves Matter. Retrieved from https://www.omfif.org/2022/07/sri-lanka-crisis-shows-why-reserves-matter/
Saxena, S. C., & Cerra, V. (2000). What Caused the 1991 Currency Crisis in India? IMF Working Papers, 2000(157), 1-28. https://doi.org/10.5089/9781451857481.001
Suranovic, S. (2010). Currency Crises and Capital Flight. In International Finance: Theory and Policy Version 1.0. Retrieved from https://open.umn.edu/opentextbooks/textbooks/18
Trade Negotiation Division. (2021, May 4). Annual Trade Statistics 2021. Thimphu: Department of Trade, Ministry of Economic Affairs. Retrieved from https://www.moea.gov.bt/?hrf_faq=department-of-trade-2
Wallstreetmojo Team. (2022). Foreign Exchange Reserve. Retrieved from https://www.wallstreetmojo.com/foreign-exchange-reserve/
Zangpo, T. (2021, November 6). Remittance in 2020 Contributed 4.82% to the GDP. Retrieved from https://kuenselonline.com/remittance-in-2020-contributed-4-82-to-the-gdp/
Zangpo, T. (2022a). FDI Declines by 40 Percent. Retrieved from https://kuenselonline.com/fdi-declines-by-40-percent/
Zangpo, T. (2022b). Finance Ministry to Come Up with Plan to Replenish Foreign Currency Reserve. Retrieved from https://kuenselonline.com/finance-ministry-to-come-up-with-plan-to-replenish-foreign-currency-reserve/
Zangpo, T. (2022c). Should Bhutan Stop Importing Non-essential Items? Retrieved from https://kuenselonline.com/should-bhutan-stop-importing-non-essential-items/
Bhutan Today. (n.d.). DHI Projects to Earn Foreign Currency. Retrieved from http://www.bhutantoday.bt/dhi-projects-to-earn-foreign-currency/
Chaudhury, D. R. (2022, August 26). Rising Imports from China Draining Bhutan’s Forex Reserves. Retrieved from https://economictimes.indiatimes.com/news/international/rising-imports-from-china-draining-bhutans-forex-reserves/articleshow/93804399.cms?from=mdr
Department of Trade, Ministry of Economic Affairs. (2021). Report on Bhutan’s External Trade. Thimphu: Ministry of Economic Affairs. Retrieved from https://www.moea.gov.bt/wp-content/uploads/2017/10/Report-on-Bhutans-External-Trade-2020.pdf
Dolkar, D. (2022, June 22). Bhutan has Enough Foreign Currency Reserve: PM. Retrieved from https://kuenselonline.com/bhutan-has-enough-foreign-currency-reserve-pm/
Etsuyo, A. (2022, October 11). Sri Lanka’s Economic Crisis: A Chinese Debt Trap? Retrieved from https://www.nippon.com/en/in-depth/d00840/
Fukuda, S.-I., & Kon, Y. (2010). Macroeconomic Impacts of Foreign Exchange Reserve Accumulation: Theory and International Evidence, ADBI Working Paper, No. 197. Tokyo: Asian Development Bank Institute (ADBI). Retrieved from https://www.econstor.eu/handle/10419/53560
Gajurel, R. P. (2022). Determinants of Nepal’s Foreign Exchange Reserve: An Empirical Study. Journal of Management, 5(1), 76-98. https://doi.org/10.3126/jom.v5i1.47763
Human Right Watch. (2022, August 16). Sri Lanka: Economic Crisis Puts Rights in Peril. Retrieved from https://www.hrw.org/news/2022/08/16/sri-lanka-economic-crisis-puts-rights-peril
International Monetary Fund. (2009). Balance of Payments and International Investment Position Manual (6th ed.). Washington, D.C.: International Monetary Fund. Retrieved from https://www.imf.org/external/pubs/ft/bop/2007/pdf/bpm6.pdf
Jha, H. B. (2022, May 2). Nepal’s Economic Crisis: Is Nepal the Next Sri Lanka? ORF. Retrieved from https://www.orfonline.org/expert-speak/nepals-economic-crisis/
Kaphle, R. R. (2021). Impact of Foreign Exchange Reserve on Economic Growth in Nepal. Journal of Management and Development Studies, 30(1), 14-23. https://doi.org/10.3126/jmds.v30i1.36347
Ministry of Finance. (2022). National Budget Financial Year 2022-23. Bhutan: Kuensel Corporation. Retrieved from https://www.mof.gov.bt/wp-content/uploads/2022/06/Budget-Report-for-FY-2022-23-in-English.pdf
Palden, T., & Zangpo, T. (2022, August 19). Govt. Suspends Import of Select Vehicles. Retrieved from https://kuenselonline.com/govt-suspends-import-of-select-vehicles/
Polterovich, V., & Popov, V. (2003). Accumulation of Foreign Exchange Reserves and Long Term Growth. Munich Personal RePEc Archive. Retrieved from https://mpra.ub.uni-muenchen.de/20069/
Royal Government of Bhutan, Ministry of Finance. (2022). Public Debt Situation Report for the Quarter-ended 30th June, 2022. Bhutan: Debt Management Division, Department of Macroeconomic Affairs. Retrieved from https://www.mof.gov.bt/wp-content/uploads/2022/08/PublicDebtSituationReport30_JUNE_2022.pdf
Royal Monetary Authority of Bhutan. (2021). Annual Report 2021. Bhutan: Royal Monetary Authority of Bhutan. Retrieved from https://www.rma.org.bt/RMA%20Publication/Annual%20Report/Annual%20Report%202020-2021-final.pdf
Sá, F. (2012). Chapter 4. Bilateral Financial Links. In G. Caprio (Ed.), The Evidence and Impact of Financial Globalization. Massachusetts, USA.: Academic Press. Retrieved from https://www.elsevier.com/books/the-evidence-and-impact-of-financial-globalization/caprio/978-0-12-397874-5
Sanghani, N. (2022, July 14). Sri Lanka Crisis Shows Why Reserves Matter. Retrieved from https://www.omfif.org/2022/07/sri-lanka-crisis-shows-why-reserves-matter/
Saxena, S. C., & Cerra, V. (2000). What Caused the 1991 Currency Crisis in India? IMF Working Papers, 2000(157), 1-28. https://doi.org/10.5089/9781451857481.001
Suranovic, S. (2010). Currency Crises and Capital Flight. In International Finance: Theory and Policy Version 1.0. Retrieved from https://open.umn.edu/opentextbooks/textbooks/18
Trade Negotiation Division. (2021, May 4). Annual Trade Statistics 2021. Thimphu: Department of Trade, Ministry of Economic Affairs. Retrieved from https://www.moea.gov.bt/?hrf_faq=department-of-trade-2
Wallstreetmojo Team. (2022). Foreign Exchange Reserve. Retrieved from https://www.wallstreetmojo.com/foreign-exchange-reserve/
Zangpo, T. (2021, November 6). Remittance in 2020 Contributed 4.82% to the GDP. Retrieved from https://kuenselonline.com/remittance-in-2020-contributed-4-82-to-the-gdp/
Zangpo, T. (2022a). FDI Declines by 40 Percent. Retrieved from https://kuenselonline.com/fdi-declines-by-40-percent/
Zangpo, T. (2022b). Finance Ministry to Come Up with Plan to Replenish Foreign Currency Reserve. Retrieved from https://kuenselonline.com/finance-ministry-to-come-up-with-plan-to-replenish-foreign-currency-reserve/
Zangpo, T. (2022c). Should Bhutan Stop Importing Non-essential Items? Retrieved from https://kuenselonline.com/should-bhutan-stop-importing-non-essential-items/
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Research Articles
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How to Cite
LHAMO, Phurpa.
The Implications of the Depletions of Foreign Currency Reserves in Bhutan.
Journal of Community Development Research (Humanities and Social Sciences), [S.l.], v. 16, n. 2, p. 23-35, apr. 2023.
ISSN 2985-0231.
Available at: <https://www.journal.nu.ac.th/JCDR/article/view/Vol-16-No-2-2023-23-35>. Date accessed: 30 apr. 2024.
doi: https://doi.org/10.14456/jcdr-hs.2023.13.