The economic activities are likely to be further strained after the government borrowed a huge amount of money from already starving banks.
Earlier this month the government drew Nu 2.7b of credit – Nu 1.7b through Treasury Bills and Nu 1b from private banks through Royal Monetary Authority (RMA).
The government was compelled to issue Treasury Bills after it failed to pay its past Treasury Bills amounting to Nu 2.5b. The government is facing acute shortage of credit since last few years.
The action will stop banks from providing any loans as liquidity plunges down. The situation is likely to get little ease with money in injected through Economic Stimulus Plan (EPS) for which India agreed to provide Nu 5b. However, the Indian government has not yet release the money.
Economic activities are almost stand still due to delay in releasing funds by the Indian government. If the delay continued, Bhutan has no alternative but to issue more T-Bills and put further pressure on the economy.
In 2013 alone, mainly during the time of the former government, around Nu.13bn in T-Bills were taken and repaid. In 2012, the figure was Nu.16bn.