ADB help for economic reform

The Asian Development Bank (ADB) has endorsed a new 5-year country partnership strategy (CPS) for Bhutan, which focuses on helping the country achieve inclusive and sustainable growth through economic reforms, improved connectivity and infrastructure, and better access to social services.

From 2020 to 2022, ADB’s commitment to the country is expected to reach $232.56 million, including $15 million in grants from the Asian Development Fund and $30 million in concessional lending from the fund’s disaster risk reduction financing mechanism. Under the new strategy, ADB will pursue cofinancing partnerships with other development partners to support the country’s goal of achieving annual economic growth of 5% to 6% and a poverty rate of less than 5% by 2023.

“Our new country partnership strategy will focus on improving the lives of the people in Bhutan by helping them get access to better social services and infrastructure, market-oriented skills, and more job opportunities, especially for the youth,” a statement quoting ADB Country Director for Bhutan Kanokpan Lao-Araya reads. 

“We will continue to leverage our finances, knowledge, and partnerships to help the government implement much-needed reforms to promote private sector development and ensure that Bhutan achieves its goal of more inclusive and sustainable growth.”

Bhutan has experienced rapid economic growth and development over the last 5 years, with gross domestic product (GDP) growth averaging 5.9% per year. GDP per capita increased to $3,555.1 in fiscal year (FY) 2018 from $2,522.1 in FY2013. However, the country remains vulnerable to economic volatility, with its narrow economic base, limited infrastructure and connectivity, as well as climate change and natural disasters.

With the new strategy, ADB’s programs, projects, and investments in Bhutan will focus on supporting government reforms that will help diversify the country’s economy by developing nonhydropower industries, such as agribusinesses, cottage and small industries, and tourism. Developing Bhutan’s finance sector and public sector reforms will be a priority for ADB to create an enabling environment, including better access to finance for greater private sector participation.

To boost connectivity, ADB will help Bhutan invest in climate-resilient transport infrastructure, including the upgrading of three domestic airports in less developed regions, namely Bumthang, Gelephu, and Yongphula, and the improvement of farm-to-market connectivity for rural farmers. ADB will also help Bhutan improve its regional integration and cooperation efforts through the South Asia Subregional Economic Cooperation to pursue project-based partnership, which focuses on transport connectivity, energy generation and cross-border transmission, and trade facilitation.

In addition, ADB will promote better living standards for people in Bhutan by improving the delivery of clean, reliable, and sustainable water services. ADB will continue to support social development through two projects approved in 2018. The first one, a skills training and education project, will help students acquire technical skills needed in the current labor market. The second project seeks to improve financial sustainability of Bhutan’s health care system and expand people’s access to it. Continued efforts to support the government’s commitment to address persisting gender equality gaps will be pursued under the new strategy.

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