The International Monetary Fund Executive Board concluded the 2025 Article IV consultation with Bhutan, projecting real GDP growth of 7.4 percent in FY2025/26 and continued strong activity in FY2026/27 on the back of tourism, hydropower exports and capital spending, with inflation expected to stabilize around 4 percent. It called for tighter fiscal and monetary policies and enhanced financial sector oversight to rebuild buffers and safeguard macroeconomic stability, while highlighting downside risks including hydropower project delays, a global slowdown, crypto-asset valuation declines, fuel-price increases and climate-related shocks. The assessment supported gradual but sustained fiscal consolidation toward the authorities’ medium-term deficit target, with scope seen for higher goods and services tax rates, fuel taxes, and tighter expenditure discipline while preserving pro-growth capital spending, alongside careful management of fiscal risks from hydropower financing. On monetary policy, it recommended absorbing excess liquidity, strengthening the monetary policy framework, improving liquidity management and moving toward an interest rate corridor. For financial stability, priorities included implementing an expected-credit-loss approach under Bhutanese accounting standards with higher provisioning needs, enforcing prudential norms, addressing concentration risks in tourism and housing, strengthening risk-based supervision and stress testing, and advancing AML/CFT effectiveness including prosecution and conviction. The IMF also noted an improved external position and higher reserves, while flagging that reserve adequacy remains weaker than warranted and pointing to steps by the Royal Monetary Authority to strengthen transparency and governance in reserve management; it further warned that the Gelephu Mindfulness City’s evolving legal and regulatory framework could create fiscal risks, regulatory and licensing arbitrage concerns, and heightened supervisory demands given permitted crypto-asset activities.
International Monetary Fund 2026-01-27
International Monetary Fund Executive Board concludes Bhutan Article IV and urges tighter policies and stronger financial supervision amid hydropower and Gelephu Mindfulness City risks
The International Monetary Fund concluded the 2025 Article IV consultation with Bhutan, projecting 7.4% GDP growth in FY2025/26 and stable inflation around 4%, while recommending tighter fiscal and monetary policies to safeguard macroeconomic stability. The IMF highlighted risks such as hydropower project delays and crypto-asset valuation declines, emphasizing the need for fiscal consolidation, improved liquidity management, and enhanced financial sector oversight.