First phase of economic stimulus plan for the hardest hit: PM

Government to inject liquidity into banks

MB Subba

The government is planning to roll out an economic stimulus plan within a few days for the most affected sectors to help them cope with the unprecedented economic impact of the novel coronavirus (COVID-19) pandemic.

Prime Minister Dr Lotay Tshering at the press briefing yesterday said that the government was working with the Royal Monetary Authority (RMA) on monetary policies, including possible suspension of loan instalments for affected enterprises and individuals.

The need to keep employees that have lost jobs economically engaged is being looked into, according to the Prime Minister. The government estimates that there are about 50,000 people engaged in the tourism and allied sectors.

The Prime Minister said that the economic impact on hotels and the number of employees that have been rendered jobless were being assessed. While some employers are reportedly willing to retain their employees, others have laid off their employees.

The government, Dr Lotay Tshering said, would roll out the economic stimulus plan based on the number of affected enterprises and people and how.

“We will announce the economic stimulus plan within this week or by Monday,” he said.

As one of the monetary measures, the government plans to inject liquidity into financial institutions to enable investors to avail loans and maintain continuity of economic activities.

“It’s a normal practice for the government to inject liquidity into financial institutions so that the money available for investors. We have already held discussions with the RMA,” Dr Lotay Tshering said in an earlier press briefing on March 14.

According to the Prime Minister, banks lack enough liquidity. 

He said that economic stimulus plan would be rolled out in phases, the first of which will be targeted at the most affected sector. The first to take a hit were the tourism and allied sectors and thousands of their employees.

Some of the channels through which the economy is expected to be hit are declines in domestic consumption, disruptions in supply of goods and services and expenses in health services.

However, he said that the government would be cautious not to exhaust monetary resources while rolling out the economic stimulus plan.

“If we are not careful, there are chances that all the money would be exhausted by the time we contain the virus,” Dr Lotay Tshering said. He added that both long-term and short-term economic interests would be considered.

He also expressed concerns about possible Equated Monthly Instalments (EMI) defaults.

A Thimphu-based tourism entrepreneur said that EMIs should be suspended until the situation improves. “For a few months, financial institutions and the government should consider EMIs for private enterprises, including hotels, tour operators,” he said.

However, the health of the financial institutions has also become a concern as the economy will face the ripple effects of the COVID-19 pandemic.

Dr Lotay Tshering said that the government would to take care of the people in such situations despite the economic concerns. He also hinted at looking into tax policies as one of the possible economic contingency plan.

The Prime Minister said that the government had a huge concern on the economy as almost everyone and enterprises will be impacted. The magnitude of the economic impact will depend on how the uncertain situation will evolve in the coming days.

In its efforts to protect the livelihoods of tour guides, the Guide Association of Bhutan (GAB) last week requested the government to come up with plans to keep guides economically engaged.

GAB president Garab Dorji said that the government had assured that keeping tour guides, and those in hotels and tour companies engaged in different activities like up-scaling training and similar activities was possible.

There are more than 4,300 tour guides in the country, according to the GAB.

There will be no tourists left in the country from March 23. The ban on tourists was supposed to last for two weeks, but the government has announced that it would be extended.

Source: Kuensel