[{"bbox": [82, 104, 1145, 426], "category": "Text", "text": "1.8 %, in FY2020-21. Services sector output is expected to fall by 3.7% and labour shortages, high input prices, and trade disruptions will continue to affect construction, manufacturing and non-hydropower exporting industries. Bhutan's other key export sectors, including agriculture, and construction have been adversely affected by the COVID 19 pandemic due to supply side disruptions for critical inputs, labour shortages and lower external demand, especially from India. Exports and imports have decreased significantly, in line with weak foreign and domestic demand and disruptions to trade. The fiscal deficit widened to 3.2% of GDP in FY2019-20, with spending growing faster than revenues. The unemployment rate has almost doubled from 2.7% in 2019. The youth unemployment rate also increased to 22.6% from 11.9% in 2019, mainly because tourism and allied industries, manufacturing, trade, and construction sectors have been heavily affected. Due to inflationary pressures and the growth decline, poverty rate is projected to increase from 11.2% in 2020 to 12.5% in 2021. The poverty headcount rate based on USD 1.9/day is expected to result in over 12,000 additional poor people (1.6% of the population). From 2021, the Royal Government of Bhutan (RGoB) expects recovery with an estimated growth of 4.3%, provided the pandemic situation improves."}, {"bbox": [82, 449, 1147, 558], "category": "Text", "text": "External risks continue to stem from weaker growth and higher inflation in **India**, Bhutan's main trading and development partner, and increases in global oil prices. The inflation rate is expected to increase in future with an increase in food prices in India and higher fuel prices. According to the World Bank, inflation rates between the two countries are strongly correlated. This has helped keep the real effective exchange rate (REER) stable."}, {"bbox": [82, 581, 1147, 714], "category": "Text", "text": "Bhutan is a member of the **International Monetary Fund** (IMF) since September 1981. The IMF supports Bhutan through the Article IV consultation process on a 24-month cycle. The last report was published in October 2018²⁰. The IMF welcomed the improvement in Bhutan's economic performance and commended the significant economic progress in recent years. The World Bank publishes its annual Bhutan Development update with the latest in April 2021."}, {"bbox": [82, 741, 1145, 903], "category": "Text", "text": "To ensure sustained growth, management of macro-economic pressures, diversification of the economy and jobs creation will continue to be priorities. Urgent steps are required to reduce unemployment among youth with focus on improving access to tertiary education. There continues to be a need to improve fiscal management, including a comprehensive medium-term debt and cash management, tighten fiscal policy and implement revenue reforms to strengthen fiscal framework as well as accelerate Goods and Services Tax (GST) implementation with social protection measures."}, {"bbox": [82, 926, 1147, 979], "category": "Text", "text": "In conclusion, the authorities are pursuing a stability-oriented macroeconomic policy and the eligibility criterion is met."}, {"bbox": [146, 990, 525, 1020], "category": "Section-header", "text": "#### 2.3.3. Public Financial Management"}, {"bbox": [82, 1026, 1147, 1348], "category": "Text", "text": "The PFM reform strategy remains sufficiently relevant and credible, with **satisfactory progress**. Good Governance is one of the four pillars of the Gross National Happiness (GNH) Index. Improving governance and accountability is one of the main agendas of the Royal Government of Bhutan (RGoB) and Strengthening Public Financial Management (PFM) is a key element of good governance. The PFM reform programme in Bhutan is based on the 2010 Public Expenditure and Financial Accountability (PEFA) and updated following the publication of the 2016 PEFA assessment. The 2016 PEFA assessments confirmed that Bhutan has **good fiscal discipline** through comprehensive coverage of budget execution, good control of expenditure commitments and oversight aggregate fiscal risk and the quality and timeliness of budget reports. The PFM Reform Strategy and Action Plan (2017-2021) continues to be the roadmap to consolidate recent PFM reforms, close gaps, improve transparency and accountability, build domestic revenue, and integrate or interface several stand-alone computerized information systems. A new PEFA assessment is planned to be concluded by 2022. Its results will inform the **PFM Reform Strategy and Action Plan for the next period**."}, {"bbox": [82, 1372, 1147, 1587], "category": "Text", "text": "As such, Bhutan continues to show **strong commitment** to implementation of reforms for **strengthening PFM** in a wide range of areas including planning, budgeting, revenue administration, asset and liability management, procurement, budget documentation, public access to information, internal control, audit and legislative scrutiny. With the support of IMF, there has been progress in the implementation of the Goods and Services Tax (GST), cash-basis International Public Sector Accounting Standards (IPSAS) and moving towards an Integrated Financial Management Information System (IFMIS). The GST legislation was passed by the Parliament in January 2020 and received the Royal Assent in April 2020. However, the start date for implementation of GST has been put back to July 2022. The Department of Public Accounts (DPA) also received some IMF support to strengthening the Treasury"}, {"bbox": [71, 1613, 1158, 1664], "category": "Footnote", "text": "²⁰ https://www.imf.org/en/Publications/CR/Issues/2018/10/30/Bhutan-2018-Article-IV-Consultation-Press-Release-Staff-Report-and-Statement-by-the-46319"}, {"bbox": [1050, 1663, 1158, 1687], "category": "Page-footer", "text": "Page 9 of 25"}]