Bhutan: Strengthening Economic Management Program

Sovereign Project | 46371-001 Status: Closed


ADB is helping the Government of Bhutan fill a resource gap in its finances and allow it to continue developing the country’s economy. The ADB-supported program will improve budget and debt management systems, strengthen revenue efforts and the revenue management system, enhance macrofinancial management, and improve external and internal audit operations.

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Project Name Strengthening Economic Management Program
Project Number 46371-001
Country Bhutan
Project Status Closed
Project Type / Modality of Assistance Grant
Source of Funding / Amount
Grant 0338-BHU: Strengthening Economic Management Program
Asian Development Fund US$ 20.81 million
Loan 2994-BHU: Strengthening Economic Management Program
Asian Development Fund US$ 14.22 million
Strategic Agendas Inclusive economic growth
Drivers of Change Governance and capacity development
Private sector development
Sector / Subsector

Finance - Finance sector development - Money and capital markets

Public sector management - Public expenditure and fiscal management

Gender Equity and Mainstreaming No gender elements

The proposed program involves a budget support for the Government of Bhutan which is currently facing weakening growth prospects as well as challenges in macroeconomic management. The objective of the program is, therefore, to strengthen macrofinancial management in the country to ensure adequate and sound development financing in a balanced and non-distortionary manner. The expected impact of the proposed program is strengthened macrofinancial management of the government in a sustainable manner. The outcome will be increased predictability in funds-flow and creation of greater fiscal space in the government budget.

A preliminary agreement between ADB and the Government of Bhutan was reached on the reform measures and policy actions required for ADB's support under the Bhutan Strengthening Economic Management Program (BSEMP), and the areas covered under policy reform program will include:

(i) Output 1: Improved budget and debt management systems. Whereby expenditure efficiency measures will be rolled out for the major spending departments, leading to better allocative efficiency of scarce public resources.

(ii) Output 2: Improved revenue management system. Revenue efforts will be strengthened by introducing a Revenue Administration Management System and introduction of property taxation based on property valuation.

(iii) Output 3: Improved macroprudential management framework. Policy actions will be initiated.

(iv) Output 4: Improved external and internal audit operations. Whereby the Royal Audit Authority (RAA) will roll out an Audit Information Management System in a phased manner over the program period. Similarly, staff of all the major departments will be trained to carry out internal audit.

Project Rationale and Linkage to Country/Regional Strategy The Bhutan: Country Partnership Strategy 2012-2013 (the Interim CPS) acknowledges that 'the tight overall balance with India has recently placed great pressure on rupee liquidity' and that 'there is limited scope to sell additional reserves' due to its constitutional requirements of maintaining foreign exchange reserves for 12 months of essential imports payments . The Interim CPS also acknowledges that to maintain high and sustainable growth trajectory, more needs to be done for improved economic management including strengthening of fiscal management. Improved monetary management, including measures for better foreign exchange reserves management, is another priority area for creating a conducive environment for high growth in a sustained manner. Thus, the proposed program adopts a two-pronged approach to confront the challenges of weak economic management in Bhutan. First, improved fiscal management will help the government to allocate scarce resources in an efficient manner. Second, improved monetary management will add further support in the government's endeavor to avoid currency mismatch.
Impact Government macro-financial management sustainably strengthened

Project Outcome

Description of Outcome More effective use of Bhutan's own financial resources in a predictable manner
Progress Toward Outcome
Implementation Progress
Description of Project Outputs

1. Improved budget and debt management systems implemented

2. Improved revenue effort and revenue management system implemented

3. Improved macroprudential management framework implemented

4. Improved external and internal audit operations implemented

Status of Implementation Progress (Outputs, Activities, and Issues)

- Thimphu & Phuntsholing municipalities are implementing the MTEF. Galephu and Samdrup Jonghkhar are working on MTEF implementation.

- Rules and regulations for property valuation methodology has been prepared by the PAVA Task Force and MoWHS, then approved by the Cabinet through the Ministry of Finance. The piloting of the rules and regulations in Phuontsholling municipality is under progress.

- RAMIS implementation status - is under progress.

- Royal Audit Authority has completed ARMS system and is waiting to lauch it.

- External audit report and training is under progress.

- The reports on medium term debt strategy and debt sustainability analysis have been prepared and are under review by MOF.

-The reports on government securities market development, capital markets master plan and credit rating agencies framework have been prepared, findings have been shared during Feb 18 Stakeholders workshop and are under review by RMA and MOF.

- The macroprudential policy measures have been prepared and are under review by RMA and will be discussed during April 4 Stakholders Workshop

-Report on wholesale retail deposit mobilizationhas been prepared and under review.

Geographical Location

Safeguard Categories

Environment C
Involuntary Resettlement C
Indigenous Peoples C

Summary of Environmental and Social Aspects

Environmental Aspects
Involuntary Resettlement
Indigenous Peoples
Stakeholder Communication, Participation, and Consultation
During Project Design
During Project Implementation

Responsible Staff

Responsible ADB Officer Cigdem Akin
Responsible ADB Department South Asia Department
Responsible ADB Division Public Management, Financial Sector and Trade Division, SARD
Executing Agencies
Department of Public Accounts
P.O. Box 117 Thimphu, Bhutan


Concept Clearance 29 Nov 2012
Fact Finding 08 Oct 2012 to 15 Oct 2012
MRM 28 Jan 2013
Approval -
Last Review Mission -
Last PDS Update 31 Mar 2014

Grant 0338-BHU

Approval Signing Date Effectivity Date Closing
Original Revised Actual
21 Mar 2013 21 Mar 2013 21 Mar 2013 30 Sep 2014 - 21 Mar 2013
Financing Plan Grant Utilization
Total (Amount in US$ million) Date ADB Others Net Percentage
Project Cost 20.81 Cumulative Contract Awards
ADB 20.81 21 Mar 2013 20.81 0.00 100%
Counterpart 0.00 Cumulative Disbursements
Cofinancing 0.00 21 Mar 2013 20.81 0.00 100%

Loan 2994-BHU

Approval Signing Date Effectivity Date Closing
Original Revised Actual
21 Mar 2013 21 Mar 2013 21 Mar 2013 30 Sep 2014 - 23 Jul 2014
Financing Plan Loan Utilization
Total (Amount in US$ million) Date ADB Others Net Percentage
Project Cost 14.22 Cumulative Contract Awards
ADB 14.22 21 Mar 2013 14.22 0.00 100%
Counterpart 0.00 Cumulative Disbursements
Cofinancing 0.00 21 Mar 2013 14.22 0.00 100%

Safeguard Documents See also: Safeguards

Safeguard documents provided at the time of project/facility approval may also be found in the list of linked documents provided with the Report and Recommendation of the President.

None currently available.

Evaluation Documents See also: Independent Evaluation

None currently available.

Related Publications

Title Document Type Document Date
Opportunities for Internal Audit Capacity Development Brochures and Flyers Aug 2015

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