Bhutan: COVID-19 Active Response and Expenditure Support Program
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.
South Asia Department
Request for information
- Public sector management
|Project Name||COVID-19 Active Response and Expenditure Support Program|
|Project Type / Modality of Assistance||Loan
|Source of Funding / Amount||
|Strategic Agendas||Inclusive economic growth
|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.
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)
|Description of Outcome||
Effect of the Program
Immediate adverse effects of COVID-19 on businesses and the population mitigated
|Progress Toward Outcome|
|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)|
|Summary of Environmental and Social Aspects|
|Stakeholder Communication, Participation, and Consultation|
|During Project Design|
|During Project Implementation|
|Consulting Services||not applicable|
|Responsible ADB Officer||Norbu, Tshewang|
|Responsible ADB Department||South Asia Department|
|Responsible ADB Division||BHRM|
Ministry of Finance
Royal Government of Bhutan
|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|
|Approval||Signing Date||Effectivity Date||Closing|
|04 May 2020||06 May 2020||06 May 2020||30 Jun 2021||-||12 Jul 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||18 Nov 2021||20.00||0.00||100%|
|Cofinancing||0.00||18 Nov 2021||20.00||0.00||100%|
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|Title||Document Type||Document Date|
|Loan Agreement (Ordinary Operations [Concessional]) for Loan 3914-BHU: COVID-19 Active Response and Expenditure Support Program||Loan Agreement (Ordinary Resources)||May 2020|
|COVID-19 Active Response and Expenditure Support Program: Report and Recommendation of the President||Reports and Recommendations of the President||Apr 2020|
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