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.

ADB's Work in Bhutan  Download Fact Sheet

After contracting by 10.2% in 2020 because of the coronavirus disease (COVID-19) pandemic, Bhutan’s economy is gradually recovering. It grew by 4.4% in 2021 and 5.2% in 2022 and is projected to grow by 4.0% in 2023 and 4.4% in 2024. Fiscal deficit increased from 1.8% of gross domestic product (GDP) in 2020 to 6.7% in 2023. The current account balance worsened from –13.0% (negative) of GDP in 2020 to around –25.2% in 2023. Foreign exchange reserves position worsened from $766.6 million at the end of 2022 to $533.3 million in November 2023. Inflation has tapered at 4.2% in 2023 but remains higher than the 5-year pre-COVID-19 rate of 3.6%.

Bhutan’s economy is unable to generate the required number of jobs due to the country’s small private sector, the dominance of state-owned enterprises, and dependence on the capital-intensive hydropower sector. Overall unemployment rate was 3.5% in 2023, with youth unemployment at 15.9%. The lack of adequate job opportunities force many working-age nationals to migrate to advanced economies. Between June 2022 and September 2023, around 16,000 Bhutanese (2% of the population) left for Australia for education and work opportunities.

ADB is working closely with the Government of Bhutan to put the country back on its strong, pre-pandemic growth path.

As of 31 December 2023, ADB has committed 207 public sector loans, grants, and technical assistance totaling $1.2 billion to Bhutan. ADB’s current sovereign portfolio in Bhutan includes 13 loans and 8 grants worth $353.1 million.

Cumulative sovereign loan and grant disbursements to Bhutan amount to $914.76 million. These were financed by regular and concessional ordinary capital resources, the Asian Development Fund, and other special funds.

In 2023, ADB approved a $5 million project readiness financing facility to support preparations for two green power projects: (i) the Bunakha hydropower project (180 megawatts [MW]) and (ii) the Nyera Amari hydropower project (404 MW).

For Bhutan’s education sector, ADB provided a $30-million loan to improve access to and expand the coverage of the country’s technical and vocational education and training. The loan is supplemented by a $2-million grant from the Japan Fund for Prosperous and Resilient Asia and the Pacific and a $3.5-million grant from the Government of Canada.

A $1.7-million regional technical assistance project funded by ADB’s Technical Assistance Special Fund, supporting Bhutan and Nepal, will help strengthen climate change adaptation and resilience in the Hindu Kush Himalaya region and will set the stage for providing Bhutan with knowledge solutions on climate-resilient investment planning, development, and risk management.

Photo: Asian Development Bank
Khuruthang Middle Secondary School students attend an electrical elective class. Photo: Sonam Phuntsho/ADB

Operational challenges. Bhutan is a small, hilly, and landlocked country with a narrow economic base. Hydropower projects and tourism have traditionally been the main drivers of the economy. Poor connectivity limits access to ADB’s project sites, which are scattered across different parts of the country. Bhutan’s small market and limited pool of suppliers, contractors, and skilled workers add to complexity in project implementation. To address frequent staff changes at ADB’s counterpart agencies, the bank is working closely with the government to enhance the implementation capacity of national and local agencies and staff. ADB continues to train staff from implementing and executing agencies on procurement processes, safeguards, financial management, and results management.

 

Knowledge Work

To support the preparation of Bhutan’s 13th Five-Year Plan for 2024–2028, ADB helped prepare a comprehensive growth diagnostic study on constraints to Bhutan’s economic growth. The study complements ADB’s private sector development initiative in Bhutan, which includes preparation of (i) a road map for public–private partnerships; (ii) a diagnostic study on state-owned enterprises (SOEs) as a precursor to the preparation of an SOE strategy; (iii) a draft bankruptcy bill; (iv) a draft competition bill; and (v) an investment opportunities study. ADB supported the preparation of implementation road maps for the National Adaptation Plan and the development of a resource mobilization strategy. ADB also continued to support the National Statistics Bureau’s efforts to transition from conducting an annual labor force survey to quarterly ones. This support resulted in the publication of the first quarterly report in November 2023. ADB purchased 500 online course licenses from edX for government officials, staff, and students at the Royal University of Bhutan for training on macroeconomic forecasting and data analysis.

Shareholding and Voting Power

Number of Shares Held
660 (0.006% of total shares)

Votes
39,774 (0.299% of total membership, 0.459% of total regional membership)

*Overall capital subscription
$8.86 million

*Paid-in capital subscription
$550,000

* United States dollar figures are valued at rate as of 31 December 2023.


ADB Governor: Lekey Dorji
ADB Alternate Governor: Leki Wangmo
ADB Director: Vikas Sheel (India)
ADB Alternate Director: Nim Dorji (Bhutan)
ADB Director's Advisor: V. Ponnuraj (India) and Smita Sarangi (India)

 

Financing Partnerships

Financing partnerships enable ADB’s financing partner governments or their agencies, multilateral financing institutions, and private organizations to participate in financing ADB projects. The additional funds provided may be in the form of loans and grants, technical assistance, and nonsovereign cofinancing.

Cumulative cofinancing commitments in Bhutan:

  • Sovereign cofinancing: $85.06 million for 13 investment projects and $23.58 million for 21 technical assistance projects since 1983
  • Nonsovereign cofinancing: $3.11 million for 1 investment project since 2004

In 2023, Bhutan received a $3.53-million grant cofinancing from the Government of Canada, and a $2-million grant cofinancing from the Japan Fund for Prosperous and Resilient Asia and the Pacific for the Pathways for Emerging Skills and Jobs Project.

 

Future Directions

ADB’s country partnership strategy for Bhutan ended in 2023, and preparatory work for a 2024–2028 strategy has started including sector and thematic assessments. The new strategy will build on the achievements under the current one to reinforce its successes and augment investments. The new strategy will be aligned with the government’s 13th Five-Year Plan which aims to develop Bhutan into a sustainable and prosperous economy.

This article was originally published in the ADB and Bhutan: Fact Sheet. Updated yearly, this ADB Fact Sheet provides concise information on ADB's operations in the country and contact information.

Last updated: 26 April 2024

Contacts

Bhutan Resident Mission
2nd Floor, Royal Textile Academy Building
Norzin Lam, Chhubachhu
Thimphu – 11001 Bhutan
Tel: +975 2 339150/339151

Ministry of Finance
Tashichhodzong
Thimphu, Bhutan
Tel: +975 2 322223/324867
Fax: +975 2 323154

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