Bhutan and ADB

ADB’s partnership strategy for Bhutan supports efforts to diversify the economy, promote policy reforms, catalyze private sector growth, improve connectivity, build climate-resilient infrastructure, and strengthen human capital.

Economic forecasts for Bhutan

Figures are based on the latest edition of ADB's Asian Development Outlook, which analyzes economic and development issues in Asia and the Pacific. This includes forecasting the inflation and gross domestic product growth rates of economies throughout the region.


Comparative economic forecasts

The latest available economic data for Bhutan compared to countries in South Asia.


Policy Challenge—Innovative Financing for Growth

The 13th Five-Year Plan acknowledges the importance of public–private partnership (PPP) to finance infrastructure development and service delivery. To overcome the plan’s resource gap, estimated at 9% of GDP, and to achieve the goal of transforming Bhutan into a high-income economy by 2034, Bhutan needs to adopt an innovative financing strategy involving all stakeholders, including the private sector. Globally, PPPs have proven vital for leveraging private finance and addressing financing gaps. The World Bank’s Private Participation in Infrastructure Report 2023 highlights that PPPs mobilized $36.4 billion across 44 economies in the first half of 2023, covering energy, health care, transport, waste, sewerage, and greenfield projects. In South Asia, PPPs attracted $1.8 billion, with India leading in implementing PPP projects. By leveraging the potential of PPPs and attracting private sector participation, Bhutan can bridge the fiscal gap for sustainable development, generate employment, and foster partnerships.

Despite political commitment and a favorable legal framework in Bhutan, progress in PPP implementation has been limited. Challenges to implementing PPP projects in Bhutan include complex institutional settings, the absence of provision for unsolicited proposals, centralized approval procedures, a small market with a nascent private sector, dominant state-owned enterprises, limited awareness of PPPs, and a scarcity of successful examples. Owing to these shortcomings, Bhutan’s only PPP, the Multi-Level Car Park in Thimphu, has not spurred further PPP development. A revised PPP policy, awaiting cabinet approval, aims to address these challenges and create a conducive environment for the smooth implementation of PPP projects. The updated policy seeks to streamline the approval process and framework, categorize projects by size for quicker approval, integrate PPP into sectoral plans, and allow unsolicited project proposals, among other enhancements.

Achieving PPP success in Bhutan requires enhanced capacity to structure and negotiate contracts. To this end, the country needs a risksharing formula and a robust mechanism for assessing and mitigating various risks. Given Bhutan’s small market and private sector, the government must actively promote a PPP agenda to attract private sector participation. It should develop capacity to assess and ensure the financial viability of PPP deals. Implementing PPP projects necessitates a robust regulatory and institutional framework, a conducive business environment, prudent fiscal management, and government commitment to reducing its sizeable contingent liabilities. Increasing access to long-term finance through domestic markets is crucial. Capacity, consensus building, and sector-wide support at all implementation levels are essential for overseeing, selecting, monitoring, and implementing PPPs. Implementing PPPs can entail complex contract structuring, negotiation, and follow-up with sometimes substantial budgetary costs. To contain these costs, the PPP program should be included in a medium-term fiscal framework. Reform of state-owned enterprises and their selective privatization are also necessary. According to the World Bank report mentioned above, such reforms have played a pivotal role in fostering the PPP process in Brazil, Colombia, and the Philippines. Experience with waste management and waste-to-energy PPP projects in Bangladesh, India, the People’s Republic of China, and the Philippines emphasize the need for robust and transparent tendering and contracting processes to realize PPP benefits. Achieving these reforms and establishing the necessary frameworks for PPPs will take time. Given the importance of this type of development financing, implementing the necessary reforms should start now.

More resources

Asian Development Bank and Bhutan: Fact Sheet

Asian Development Bank and Bhutan: Fact Sheet

The Fact Sheets summarize ADB's partnerships with member economies, providing key facts and figures and an overview of activities and future directions.

Asian Development Outlook (ADO) April 2024

Asian Development Outlook

The Asian Development Outlook analyzes economic and development issues in developing countries in Asia.

Key Indicators for Asia and the Pacific 2023

Key Indicators

The Key Indicators for Asia and the Pacific publication presents data regarding the economic, financial, social, and environmental situations in a broad range of countries across the region.

Basic Statistics 2024

Basic Statistics

The Basic Statistics brochure presents data on selected social, economic, and SDG indicators such as population, poverty, annual growth rate of gross domestic product, inflation, and government finance for economies in Asia and the Pacific.