Introduction of Currency in Bhutan

Until the early 1970s, Bhutan operated largely without a national currency. Taxes were paid in grain, butter, and cloth; government officials received their salaries in kind; and inter-community exchange relied on barter, supplemented by Indian Rupees that circulated informally across the border. The introduction of the Bhutanese Ngultrum in 1974 — timed deliberately to coincide with the coronation of the Fourth King, Jigme Singye Wangchuck — was both a practical economic reform and a powerful statement of national identity.

The Pre-Monetary Economy

Bhutan's traditional economy was one of the most completely non-monetised in Asia. In the highlands, communities exchanged yak products — butter, cheese, dried meat, and wool — for grain from lower-altitude farmers, a vertical exchange system that had sustained Himalayan communities for centuries. In the middle valleys, rice, maize, and vegetables were traded for iron tools, textiles, and salt from Tibet. Government revenue was collected in kind: households owed specified quantities of grain, labour days (woola), and craft products to the dzong administration.

Indian Rupees had circulated in the border districts for trade with Assam and Bengal since at least the 19th century, and their use expanded as Bhutan's trade with India grew after independence. But Rupees remained confined largely to commercial transactions in the lowland border towns; in the interior, barter remained the norm well into the 1960s. Until textiles could no longer be used to pay taxes and fines — a change that came gradually during the Third King's reign — the idea of monetary payment for government obligations was novel.

Steps Towards Monetisation: The 1950s and 1960s

The Third King, Jigme Dorji Wangchuck, began the gradual monetisation of the Bhutanese economy in the mid-1950s. The government issued small-denomination coins — using nickel alloy rather than silver, but maintaining the Ngultrum denomination name — which circulated alongside the Indian Rupee in areas where cash transactions were becoming more common. These coins had limited reach in the rural interior but established the concept of Bhutanese monetary instruments.

The Bank of Bhutan was established in 1968, a further step towards a functioning monetary system. The bank initially operated primarily as a savings and credit institution, but its existence signalled that the administrative infrastructure for a currency system was being put in place. The development programmes of the Five-Year Plans, which required wage payments to construction workers and salaries for an expanding civil service, accelerated the monetisation of the economy: people who worked for wages needed something to spend them on, and markets developed accordingly.

The 1974 Ngultrum: A Sovereign Currency

Monetary reform was formalised in 1974 under the Fourth King. On 2 June 1974, the Ministry of Finance issued the first Bhutanese banknotes: Nu.1, Nu.5, and Nu.10 denominations, with the timing linked to the Fourth King's coronation to maximise the symbolic weight of the new currency's introduction. Subsequent denominations — Nu.2, Nu.20, Nu.50, and Nu.100 — followed in 1978. The unit was standardised at 100 Chhetrum to 1 Ngultrum.

The Ngultrum was pegged at par with the Indian Rupee (1 Nu. = 1 INR), a decision that reflected the deep economic integration between the two countries. Indian Rupees remained legal tender in Bhutan, and this dual-currency arrangement persists today (with certain high-denomination Indian notes excluded). The peg has provided exchange-rate stability at the cost of monetary policy autonomy — Bhutan's monetary conditions are effectively set by the Reserve Bank of India rather than by the Royal Monetary Authority of Bhutan (RMA), which was established by act of parliament in 1982 and began operations in 1983.

Persistence of Barter and Social Transition

The introduction of banknotes did not immediately displace barter in remote areas. In the highland yak-herding communities of northern Bhutan and in isolated eastern valleys, barter of chugo (dried cheese), butter, rice, and woven textiles continued for years after 1974. The penetration of monetary exchange into these areas followed the roads: as the east-west lateral highway and its feeder roads reached new communities, market access created both the possibility and the necessity of cash transactions.

The social implications of monetisation were profound. Barter systems embedded social obligations and community relationships; monetary exchange was more impersonal and more flexible. The shift undermined some traditional forms of reciprocity while enabling new kinds of economic activity, including wage employment and commercial agriculture. Bhutan's subsequent economic development — including the hydropower sector that now dominates its export economy — would have been inconceivable without a functioning national currency system.

References

1. Royal Monetary Authority of Bhutan. "Brief History of Currency of Bhutan." rma.org.bt, accessed 2026.
2. Daily Bhutan. "The History and Evolution of Money in Bhutan." dailybhutan.com, accessed 2026.
3. Kuensel Online. "History of Currency in Bhutan." kuenselonline.com, accessed 2026.
4. Druk Asia. "The Bhutanese Currency: Everything You Need to Know." drukasia.com, accessed 2026.