Development Policy Credit 2: Fiscal Sustainability&Investment Climate

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The development objectives of the Second Fiscal Sustainability and Investment Climate Development Policy Credit Project for Bhutan are to promote fiscal discipline, improve access to finance for enterprises, and improve the climate for business entry and investment in Bhutan. The programmatic series has three pillars: (i) strengthening fiscal sustainability and self-reliance; (ii) increasing access to finance; and (iii) improving the investment climate and increasing domestic and foreign investment. To realize rapid economic growth, the Royal Government of Bhutan (RGoB) continues to focus on five economic jewels: hydropower, agriculture, tourism, cottage and small industries, and mining. Implementation of the development management system has supported poverty reduction and gender equality. To sustain these achievements, two key economic challenges must be addressed: sustaining macroeconomic stability and boosting private-sector development. The high current account deficits are the result of elevated imports associated with the construction of hydropower projects, which are covered by long-term donor financing. Private-sector-led economic development will depend on further improving the investment climate.