Bhutan's Financial Sector: A Cornerstone for 13th Five-Year Plan Success

Sweeping financial sector reforms are emerging as a crucial factor in Bhutan’s ability to achieve the ambitious goals set in its 13th Five-Year Plan. Experts emphasize that financial deepening—expanding the size, efficiency, and liquidity of the financial market—is essential for sustaining economic growth, reducing borrowing costs, and unlocking private sector potential.  

 

The Asian Development Bank has highlighted concerns regarding Bhutan’s financial depth, noting that stagnant private sector credit growth and reliance on fixed asset-backed loans have limited access to higher-return investments. Net claims on the private sector have averaged around 60 percent of the country’s GDP between 2016 and 2024, significantly lower than comparable economies such as Nepal, which exceeds 80 percent.  

 

Bhutan’s financial market development also lacks diversification, with banks primarily offering collateral-based loans. The tourism and housing sectors account for a significant portion of lending, creating risks of credit concentration. While the non-performing loan ratio has declined from 14.6 percent in 2020 to 7.4 percent in 2024, experts caution that this drop may not reflect actual sectoral health, as many deferred repayments under pandemic-era relief measures are nearing expiration.  

 

Key financial sector priorities for Bhutan’s 13th Five-Year Plan:  

With Bhutan’s financial market facing challenges, targeted reforms will be essential in ensuring stability and fostering sustainable economic development.  

 

Sources: Kuensel Online, Business Bhutan.