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Bhutan: COVID-19 Active Response and Expenditure Support Program

Sovereign (Public) Project | 54183-001 Status: Active

The COVID-19 Active Response and Expenditure Support (CARES) Program will support the Royal Government of Bhutan's fiscal and monetary measures under the Economic Contingency Plan (ECP), comprising three broad approaches: (i) social relief, (ii) fiscal and monetary measures, and (iii) targeted interventions. The CARES Program aims to provide critically needed assistance to the Kingdom of Bhutan in mitigating immediate adverse effects of COVID-19 on businesses and the population, especially the women and vulnerable groups. The expenditure plan of the program has a strong gender focus including loans with 3-month deferred payments and micro loans at concessional rates targeting women and cottage and small industries. The program will also support establishing the National Resilient Fund, through which the ECP will be channeled, with a gender-, age-, and disability targeting and monitoring system.

Project Details

Project Officer
Norbu, Tshewang South Asia Department Request for information
Country
  • Bhutan
Sector
  • Public sector management
 
Project Name COVID-19 Active Response and Expenditure Support Program
Project Number 54183-001
Country Bhutan
Project Status Active
Project Type / Modality of Assistance Loan
Source of Funding / Amount
Loan 3914-BHU: COVID-19 Active Response and Expenditure Support Program
concessional ordinary capital resources lending / Asian Development Fund US$ 20.00 million
Strategic Agendas Inclusive economic growth
Regional integration
Drivers of Change Gender Equity and Mainstreaming
Governance and capacity development
Sector / Subsector

Public sector management / Economic affairs management - Public expenditure and fiscal management - Social protection initiatives

Gender Equity and Mainstreaming Effective gender mainstreaming
Description The COVID-19 Active Response and Expenditure Support (CARES) Program will support the Royal Government of Bhutan's fiscal and monetary measures under the Economic Contingency Plan (ECP), comprising three broad approaches: (i) social relief, (ii) fiscal and monetary measures, and (iii) targeted interventions. The CARES Program aims to provide critically needed assistance to the Kingdom of Bhutan in mitigating immediate adverse effects of COVID-19 on businesses and the population, especially the women and vulnerable groups. The expenditure plan of the program has a strong gender focus including loans with 3-month deferred payments and micro loans at concessional rates targeting women and cottage and small industries. The program will also support establishing the National Resilient Fund, through which the ECP will be channeled, with a gender-, age-, and disability targeting and monitoring system.
Project Rationale and Linkage to Country/Regional Strategy

Bhutan is a small landlocked and vulnerable country. While basic health services are free, Bhutanese face a considerable logistic challenge in accessing health services. As a resource-constrained country with limited health facilities infrastructure and personnel an outbreak of infections could easily overwhelm the existing system capacity. The government has therefore taken early and stringent prevention and containment response measures to implement the National Preparedness and Response Plan for COVID-19. Although the health response is effective, it has also resulted in severe collateral social and economic costs. It is estimated that FY2020 growth rate will shrink 5 percentage points, dropping to 1.0% from 6.0% previously. This will also cost about 23,000 jobs, causing the recent 3.4% unemployment rate to swell to 10%. The containment efforts have also placed significant fiscal pressure on the government. The fiscal deficit is expected to increase to 5.6% of GDP in FY2020 and then to 9.4% in FY2021.

The CARES program will provide timely support to help the government implement socioeconomic responses supplementing the ongoing effective health responses to contain the pandemic. Bhutan meets all six access criteria of ADB's CPRO under the countercyclical support facility (CSF). First, The COVID-19 pandemic has significantly dampened growth prospects. Growth will likely plunge to 1.0% a 5.0 percentage point drop from pre-COVID-19 estimates. Second, the government-initiated pro-poor countercyclical ECP worth about $400 million (16.76% of GDP) is a comprehensive intervention. Third, the government maintained a sound macroeconomic management record before the pandemic. From FY1998 to FY2018, Bhutan's economy grew remarkably at an annual average of 7.0%. And fiscal deficit has been maintained consistently lower than 3% of GDP. Fourth, the government has undertaken early and systematic structural reforms to prevent and contain the pandemic and protect public health effectively through prioritizing and reallocating budget resources for implementing the National Preparedness and Response Plan for COVID-19. Fifth, though the debt ratio is 117.0% of GDP in FY2019, the International Monetary Fund has assessed Bhutan's risk of debt distress as moderate because 74.4% of this debt is concentrated in financially viable hydropower projects. Sixth, ADB coordinates closely with the IMF on macroeconomic monitoring and participates in Article IV missions. The IMF supports the program and provided the assessment letter.

Impact

Country's Overarching Development Objectives

Adverse impacts of COVID-19 on the economy, and well-being of the population, mitigated (Economic Contingency Plan and the National Preparedness and Response Plan for Outbreak of COVID-19)

Project Outcome
Description of Outcome

Effect of the Program

Immediate adverse effects of COVID-19 on businesses and the population mitigated

Progress Toward Outcome
Implementation Progress
Description of Project Outputs

Inclusive relief measures for the vulnerable groups implemented

Economic stimulus for productive sectors provided

Status of Implementation Progress (Outputs, Activities, and Issues)
Geographical Location Nation-wide
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
Business Opportunities
Consulting Services not applicable
Procurement not applicable
Responsible ADB Officer Norbu, Tshewang
Responsible ADB Department South Asia Department
Responsible ADB Division BHRM
Executing Agencies
Ministry of Finance
Royal Government of Bhutan
Thimphu, Bhutan
Attention: Director
Timetable
Concept Clearance -
Fact Finding 06 Apr 2020 to 06 Apr 2020
MRM 16 Apr 2020
Approval 04 May 2020
Last Review Mission -
Last PDS Update 04 May 2020

Loan 3914-BHU

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
04 May 2020 06 May 2020 06 May 2020 30 Jun 2021 - -
Financing Plan Loan Utilization
Total (Amount in US$ million) Date ADB Others Net Percentage
Project Cost 20.00 Cumulative Contract Awards
ADB 20.00 04 May 2020 20.00 0.00 100%
Counterpart 0.00 Cumulative Disbursements
Cofinancing 0.00 04 May 2020 20.00 0.00 100%

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Safeguard Documents See also: Safeguards

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Evaluation Documents See also: Independent Evaluation

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Related Publications

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Tenders

No tenders for this project were found.

Contracts Awarded

No contracts awarded for this project were found

Procurement Plan

None currently available.