Economic Contingency Plan of Bhutan

The Economic Contingency Plans (ECP I and ECP II) were a series of emergency economic policy measures developed and implemented by the Royal Government of Bhutan in 2020 and 2021 in direct response to the severe economic disruption caused by the COVID-19 pandemic. Unlike the five-year development plans that constitute Bhutan's normal planning framework, the ECPs were crisis instruments — rapid-response documents integrating fiscal, monetary, programmatic, and social protection measures into a coherent short-term strategy. Their design reflected both the acute severity of the pandemic's economic impact on Bhutan's small, tourism-dependent economy and the capacity of the Royal Government to mobilise extraordinary resources through the Kidu system and the personal initiative of His Majesty King Jigme Khesar Namgyel Wangchuck.

Economic Context and Impact

When the COVID-19 pandemic reached Bhutan in early 2020, the kingdom's economy — valued at approximately US$2.4 billion and highly dependent on tourism revenues and hydropower exports — was particularly exposed. Tourism alone accounted for the livelihoods of approximately 50,000 Bhutanese citizens directly and indirectly; the complete closure of Bhutan's borders to tourists from March 2020 effectively eliminated this sector overnight. GDP contracted by 2.4 per cent in FY2019–20 and by a further 3.7 per cent in FY2020–21, the first sustained economic contraction in Bhutan's post-1961 history. The World Bank revised its GDP growth projections for Bhutan from 6.5 per cent to between 2.2 and 2.9 per cent. Construction, retail, and hospitality subsectors were particularly hard hit, with numerous small and medium enterprises unable to service bank loans or meet payrolls.

The National Resilience Fund

On 11 April 2020, His Majesty The King announced the creation of the National Resilience Fund (NRF), an emergency financing vehicle with total mobilised measures valued at approximately Nu 30 billion. The NRF was conceived as a multi-dimensional resource package rather than a single cash fund, encompassing directed credit facilities, loan restructuring provisions, fiscal reprioritisation, and expanded social protection entitlements. It served as the overarching financial architecture within which the ECP measures operated.

Immediate financial relief measures under the NRF included:

• Interest payment waivers on all commercial bank loans for the period April to June 2020;
• A three-month moratorium on loan repayments for affected borrowers;
• Accelerated disbursement of development funds to maintain construction activity;
• Expansion of the Druk Gyalpo's Relief Kidu, which provided direct income support to citizens who had lost livelihoods, accommodation assistance for students undergoing medical treatment abroad, and travel cost coverage for Bhutanese nationals stranded in third countries.

ECP I: Three Flagship Programmes

The first Economic Contingency Plan concentrated national recovery resources on three interconnected flagship programmes, chosen for their capacity to create immediate employment while addressing structural weaknesses in the Bhutanese economy.

Build Bhutan

The Build Bhutan Project, launched on 30 June 2020, targeted the creation of a domestically sourced construction workforce as a replacement for the Indian and Bangladeshi migrant labour whose movement had been curtailed by pandemic-related border closures. The programme set a target of engaging 7,000 job-seekers — including workers made redundant from tourism, hospitality, and retail — in the construction sector, through a combination of skills training, minimum wage guarantees, and professional standards reform designed to make construction work financially attractive to Bhutanese workers who had historically avoided the sector. The programme also served a longer-term structural objective: developing a permanent pool of skilled domestic construction labour to reduce Bhutan's chronic dependence on foreign workers.

Tourism Resilience

The Tourism Resilience programme aimed to safeguard the institutional capacity of Bhutan's tourism industry — tour operators, hotels, guides, and transport providers — during the period of border closure, so that the sector could recover rapidly once international travel resumed. Measures included deferred payment of tourism levies, subsidised loan restructuring for hospitality enterprises, and investment in the development of new domestic tourism products.

Food Self-Sufficiency and Nutrition Security

The third flagship programme accelerated existing agricultural development initiatives to reduce Bhutan's significant dependence on food imports, particularly from India. The programme funded expanded irrigation infrastructure, improved linkages between rural vegetable growers and urban markets, and incentives for the production of staple crops. Agricultural development under ECP I also aligned with the organic farming transition strategy of the Twelfth Five-Year Plan.

Fiscal Response and ECP II

The Royal Government reprioritised Nu 3.7 billion within the Twelfth Five-Year Plan's existing capital budget to create the fiscal space for ECP I measures. The 2021 Fiscal Incentives Act provided a package of tax exemptions and deferrals to provide further relief to businesses. ECP II extended and refined many of the ECP I measures as it became apparent that the pandemic's economic effects would persist beyond the initial emergency phase, and added provisions for the health sector to manage surge capacity and the vaccine rollout that Bhutan conducted with exceptional speed in 2021 — administering first doses to approximately 93 per cent of the eligible population in a nine-day campaign in March 2021.

References

1. ORF. "Bhutan: Pandemic and Economic Resilience." Observer Research Foundation, 2021. https://www.orfonline.org/research/bhutan-pandemic-and-economic-resilience-64872
2. UN SDG. Bhutan COVID-19 Socio-Economic Response Plan 2020. https://unsdg.un.org/sites/default/files/2020-09/BTN_Socioeconomic-Response-Plan_2020_updated.pdf
3. Business Bhutan. "Build Bhutan Project to Engage 7,000 Job Seekers in Construction Sector." https://businessbhutan.bt/build-bhutan-project-to-engage-7000-job-seekers-in-construction-sector/
4. Friedrich Naumann Foundation. "Bhutan's Fiscal and Monetary Measures Coming Out of COVID-19 Years." https://www.freiheit.org/south-asia/bhutans-fiscal-and-monetary-measures-coming-out-of-covid-19-years
5. ADB. COVID-19 Active Response and Expenditure Support Program. Project 54183-001. https://www.adb.org/projects/documents/bhu-54183-001-rrp