[{"bbox": [83, 105, 1150, 187], "category": "Text", "text": "second NDC for enhanced mitigation and adaptation actions and envisaged a Low Emissions Development Strategy (LEDS) in forest conservation and management (under the national REDD+ strategy) and in food security interventions – both are extremely important to be supported under this programme."}, {"bbox": [83, 211, 1150, 451], "category": "Text", "text": "The overall 12th FYP (2018-2023) has a financial outlay of circa EUR 4 billion¹⁷, an increase of 38 % over the 11th FYP. With regard to RNR sector, the overall allocation for the MoAF under the 12th FYP is EUR 175 million, out of which EUR 38 million is for current expenditure and EUR circa 136 million is earmarked for capital expenditure. In term of programmes, approximately 50 % of the resource is earmarked for food and nutrition security, 15 % towards natural resource management, 14 % towards climate smart resilient development and 8 % for value chain and enterprise development. The Ministry has devised and implementing an ‘Agricultural Stimulus Plan’ since June 2020, in order to mitigate the impacts of COVID19 pandemic. The stimulus plan with an estimated budget of EUR 38 million for the period June 2020 to June 2021, aims to promote self-reliance by increasing the production of priority commodities as well as to reduce dependency of imports of essential foods."}, {"bbox": [83, 476, 1150, 717], "category": "Text", "text": "The proposed action is a continuation of the EU Budget Support programme under the previous MIP, which supported the RNR sector's 11th and 12th FYP priorities. RGoB's execution of the previous budget support operation in the sector has delivered successful development outcomes (e.g. food self-sufficiency with respect to milk, egg and vegetable production enhanced) and with reform oriented policy measures undertaken (e.g. establishing **RNR Statistics Division**, National Climate Change Policy), ensuring all agreed fixed and variable targets are met. While there are needs to strengthen the institutional capacity of the Ministry in areas related to statistics, collection of disaggregated data, mainstreaming gender and digital tools, The quality of the systems related to statistical and monitoring system, availability of accurate data are sufficient for the credibility of the policy and for the implementation of budget support programme."}, {"bbox": [83, 742, 1150, 796], "category": "Text", "text": "In conclusion, the policy is sufficiently relevant and credible for budget support contract objectives to be largely achieved. Therefore, the policy can be supported by the Commission with the proposed budget support contract."}, {"bbox": [147, 805, 456, 834], "category": "Section-header", "text": "### 2.3.2. Macroeconomic Policy"}, {"bbox": [83, 842, 1143, 976], "category": "Text", "text": "The Government in Bhutan is pursuing a stability-oriented macroeconomic policy. The Public Finance Act, 2007 and Amendment 2012 of Bhutan mandate the Ministry of Finance to coordinate government macro-economic policies and report on the state of the economy and fiscal position of the Government. The Department of Macroeconomic Affairs is responsible for macroeconomic coordination, fiscal policy, debt management and investment and corporate governance."}, {"bbox": [83, 1001, 1143, 1321], "category": "Text", "text": "Fiscal revenues from **hydropower** have helped finance large investments in human capital, which led to significant improvements in service delivery and educational and health outcomes. Hydropower construction and supportive fiscal and monetary policy have contributed to solid growth and macroeconomic stability. Single-digit inflation, a stable exchange rate, and accumulating international reserves attest to its stability. However, inflation is expected to rise from 3.0% in FY2020 to 6.4% in FY2021 due to supply chain disruption and panic buying (World Bank, 2021). Nevertheless, structural challenges remain, including high public debt, an underdeveloped private sector, and a high youth unemployment rate. The current account deficit is expected to stabilise at 7.7% of GDP in FY2021 as imports contract on falling domestic demand. In FY2022, increased imports resulting from recovery in investment and private consumption would help increase the current account deficit to 10.4% of GDP. A delay in hydropower construction could cloud macroeconomic prospects in the coming years. The country is confirmed to **graduate** from its current LDC status to the Middle Income Countries group by December 2023 with a GDP per capita of USD 3,294, but ODA needs will remain important until electricity exports will reach full capacity."}, {"bbox": [83, 1346, 1143, 1454], "category": "Text", "text": "**Public debt** projected for the fiscal year 2020-21 rose to 126.5 % of GDP, an increase of 8.4 % from the previous year)¹⁸. However, as the bulk of the debt is linked to hydropower project loans from India, debt sustainability risks are moderate. Debt management shall be carried out prudently to ensure that the external debt stock remains at sustainable level within the thresholds prescribed in the Public Debt Policy 2016¹⁹."}, {"bbox": [83, 1478, 1143, 1559], "category": "Text", "text": "Bhutan has suffered a significant socio-economic setback in 2020 due to the **COVID 19 pandemic** and respective containment measures, with the tourism sector having suffered the most. In 2019-20, growth is estimated to be negative at -0.8% as compared to 4.3% in FY2018-19 (ADB, 2021). The economy is projected to contract further by"}, {"bbox": [73, 1591, 228, 1614], "category": "Footnote", "text": "¹⁷ 1 EUR = Nu. 88"}, {"bbox": [73, 1615, 555, 1639], "category": "Footnote", "text": "¹⁸ UN's Committee for Development Policy report, 2021."}, {"bbox": [73, 1639, 737, 1663], "category": "Footnote", "text": "¹⁹ RGoB published the Medium-Term Debt Management Strategy, March 2021"}, {"bbox": [1051, 1663, 1158, 1687], "category": "Page-footer", "text": "Page 8 of 25"}]