The National Budget for Financial Year 2025–26, presented in May 2025 under the second Tshering Tobgay government, was the second annual budget of the 13th Five-Year Plan and a record at Nu 138.5 billion in proposed appropriation. Framed under the theme "Accelerating Prosperity and Social Transformation through Enterprise, Innovation, and Efficiency," it raised social-sector spending, ramped up Gelephu Mindfulness City funding and introduced a new Goods and Services Tax framework that came into force in January 2026.
The National Budget for Financial Year 2025–26 (1 July 2025 – 30 June 2026) was tabled in the National Assembly in May 2025 by Finance Minister Lekey Dorji of the People's Democratic Party. It was the second annual budget of the 13th Five-Year Plan and the highest in nominal terms in Bhutan's history, with proposed appropriation of Nu 138,500.7 million.[1]
Total expenditure was projected at Nu 119,211.3 million, of which Nu 58,481.2 million was allocated to current expenses and the remainder to capital and net lending. Spending was set to rise by more than 33 per cent over the previous year, driven by larger capital investments, the ramp-up of the Gelephu Mindfulness City Special Administrative Region, and rising debt-service costs on hydropower borrowings.[2]
The budget was framed under the theme "Accelerating Prosperity and Social Transformation through Enterprise, Innovation, and Efficiency." It introduced a series of tax reforms passed by Parliament in July 2025 — the Goods and Services Tax Bill, an amended Excise Tax Bill and revised Income Tax Bills — all of which came into force on 1 January 2026.[3]
Spending Priorities
Social services received the largest share of the 2025–26 budget. Combined allocations to education and health exceeded Nu 40 billion, accounting for around thirty per cent of the total appropriation. Education alone was allocated almost Nu 28 billion, with the funding directed towards school infrastructure, the rollout of curriculum reforms, the Bhutan Baccalaureate programme and the supply of qualified teachers across the dzongkhag school system.[4]
Capital expenditure was projected to grow by nearly forty per cent, with major allocations for human-resource development, health-system strengthening, school construction, rural roads, irrigation and bridges. The budget also expanded the central government's grants to local governments — the dzongkhag, gewog and thromde administrations — under the Constitutional principle of fiscal decentralisation.[2]
Gelephu Mindfulness City
The Gelephu Mindfulness City, established by Royal Charter on 13 February 2024 and brought under the Application of Laws Act on 26 December 2024, received expanded budgetary backing in 2025–26. Capital provision covered preparatory infrastructure, planning and the early implementation of the Special Administrative Region. The bulk of GMC investment was expected to flow from outside the regular budget — through Bhutan's first-ever domestic sovereign bond launched in 2025, foreign direct investment, and pledges including a 2025 commitment by His Majesty the King to anchor a Bitcoin-denominated reserve to support GMC.[2]
Tax Reform
The 2025–26 budget framed and accompanied the most substantial overhaul of Bhutan's tax system in two decades. The new Goods and Services Tax replaced the existing Bhutan Sales Tax with a broader-based, value-added consumption tax intended to reduce cascading and to widen the tax base. Amendments to the Excise Tax Bill restructured rates on tobacco, alcohol and selected luxury items. Revisions to the Income Tax Bills updated personal-income-tax slabs, corporate-income-tax provisions and tax administration. The package was passed by Parliament in July 2025 and entered into force on 1 January 2026.[5]
The International Monetary Fund's 2025 Article IV consultation, concluded in January 2026, welcomed the tax reform as a significant step in domestic resource mobilisation following Bhutan's graduation from Least Developed Country status, while flagging risks from rising public debt, the cryptocurrency-related fiscal exposure and the brain drain to Australia.[6]
Debt and Fiscal Deficit
Total public debt as of 31 March 2025 stood at Nu 298,183.3 million, or 99.1 per cent of the estimated GDP for FY 2024–25. Finance Ministry projections suggested public debt could exceed 112 per cent of GDP by the end of FY 2025–26 as new hydropower-project loans from India were drawn down. The fiscal deficit was projected to widen to around 3.7 per cent of GDP from the 2.3 per cent recorded in 2024–25, reflecting the larger capital programme.[7]
External grants in 2025–26 continued to be dominated by Indian assistance, although the share of grants in total resources was expected to fall as Bhutan adjusted to post-LDC concessional-financing terms. The budget also incorporated higher dividends and profit transfers from Druk Holding and Investments and from key hydropower state-owned enterprises as new generation came online.[3]
References
- Finance Minister Presents Budget for FY 2025–26 to the National Assembly — National Assembly of Bhutan
- Government unveils Performance-Driven Budget for 2025–26 — The Bhutanese
- Budget Report for FY 2025–26 — Ministry of Finance
- Finance Ministry unveils record Nu 138bn budget for FY 2025–2026 — BBS
- IMF Executive Board Concludes 2025 Article IV Consultation with Bhutan — IMF, 26 January 2026
- IMF Country Report No. 26/19, Bhutan — IMF, January 2026
- Fiscal deficit to rise to 3.7% of GDP — BBS
See also
National Environment Protection Act of Bhutan, 2007
The 2007 statute that codifies environmental protection in Bhutan, establishes the National Environment Commission as the apex environmental authority, and operationalises the constitutional 60% forest-cover guarantee.
politics·5 min readNational Cadastral Resurvey of Bhutan
The National Cadastral Resurvey Programme is the multi-decade Bhutanese project to update the country's land records using modern geographic information system (GIS) survey methods. It replaced the legacy thram-based registration system, was completed across all 20 dzongkhags by 2010, and is administered by the National Land Commission Secretariat under the Land Act of Bhutan 2007. The programme has produced a digital land registration database but has also generated disputes over excess land and surveying errors.
politics·6 min read2018 National Assembly Elections
The 2018 Bhutanese National Assembly election, held on 18 October 2018, saw the newly formed Druk Nyamrup Tshogpa (DNT) defeat the incumbent People's Democratic Party (PDP) in a continuation of Bhutan's anti-incumbency trend. DNT leader Lotay Tshering, a practising urologist, became Prime Minister, bringing a fresh outsider perspective to governance and prioritising healthcare and education reform.
politics·5 min readNational Environment Commission (Bhutan)
The National Environment Commission (NEC) is the apex environmental policy body of Bhutan. It traces its origins to the National Environment Committee created in 1989 within the Planning Commission, was upgraded to an independent National Environment Commission in 1992, and acquired its current legal mandate under the National Environment Protection Act 2007. The NEC is chaired by the Prime Minister and is the principal locus of environmental clearances, climate policy and the country's carbon-negative commitment.
politics·6 min readGross National Happiness Commission
The Gross National Happiness Commission (GNHC) is the central planning and coordinating body of the Royal Government of Bhutan, responsible for formulating five-year plans, screening all new policies against GNH criteria, and coordinating development activities across government sectors. Originally established as the Planning Commission in 1971, it was renamed the GNH Commission in 2008 to reflect its expanded mandate.
politics·6 min readGross National Happiness Index
The Gross National Happiness (GNH) Index is a comprehensive measurement tool developed by Bhutan to assess the well-being of its population across nine domains and 33 indicators. First formalized through national surveys in 2008, the index operationalizes the philosophy articulated by the Fourth King, Jigme Singye Wangchuck, that development should be measured by happiness rather than economic output alone.
politics·7 min read
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