ADB Approves $40M Loan to Boost Bhutan's Financial Management and Green Growth

The Asian Development Bank (ADB) has greenlit a $40 million policy-based loan aimed at bolstering Bhutan's public financial management capabilities and advancing its green growth agenda.

This concessional loan represents the continuation of ADB's support through the Fiscal Sustainability and Green Recovery Program, Subprogram 1, initially approved in October 2022. The program focuses on enacting policy reforms that expand domestic resource mobilization, foster private sector development, and integrate climate change adaptation and mitigation efforts.

Chandan Sapkota, ADB's Public Management Economist, highlighted the loan's strategic alignment with Bhutan's developmental goals, particularly its 13th 5-year plan and the ambition to achieve high-income status by 2034. Sapkota emphasized that the reforms under this new subprogram will fortify revenue streams, enhance the business environment, and integrate gender considerations into national adaptation plans, thereby ensuring fiscal sustainability and fostering sustainable economic growth.

Key reforms will include strengthening domestic resource mobilization through enhanced customs and property tax administration, implementation of a medium-term revenue strategy, and improvements in the governance of state-owned enterprises. These measures aim to narrow the gap between expenditures and tax revenues significantly. Additionally, the introduction of an integrated financial management information system will enhance overall public financial management effectiveness.

Moreover, the program will facilitate private sector development by supporting Bhutan's Economic Development Board, facilitating the adoption of Trade and Industry Rules 2023, and implementing the Public–Private Partnership Policy 2024. Modernizing and digitizing investment processes, business operations, and trade services are pivotal to enhancing the ease of doing business in Bhutan.

In tandem with economic goals, the program will prioritize sustainable growth initiatives. It will guide reforms to advance Gender Equality and Social Inclusion (GESI)-responsive climate change adaptation and mitigation strategies aligned with Bhutan's National Adaptation Plan and its nationally determined contributions. Furthermore, the program will aid Bhutan in engaging with the global carbon market and diversifying its energy sources.

The ADB's continued support underscores its commitment to Bhutan's socio-economic advancement and environmental stewardship, positioning the country to navigate future challenges while fostering inclusive and sustainable development.