Remittance in 2020 contributed 4.82% to the GDP

The amount was higher than the combined remittance of the past three years

Thukten Zangpo

At Nu 8.27 billion (B), remittance inflow in 2020 contributed about 4.82 percent to the gross domestic product (GDP), making it the highest remittance inflow so far. The amount is more than the remittance of the past three years combined.

Remittance in 2017, 2018, and 2019 amounted to Nu 7.8B, according to the Royal Monetary Authority’s (RMA) October monthly statistical bulletin. Remittance inflow in 2017, 2018, and 2019 was Nu 1.9B, Nu 3B and Nu 2.9B respectively.

Remittance is a transfer of money by a foreign worker (non-resident Bhutanese) back to their home country. Remittance helps to improve the foreign exchange reserves and reduces the deficit in the current account by improving the country’s balance of payments.

The growth in remittance was 185 percent, which has come as a help when the country lost foreign currency earning capacity because of the pandemic in 2020, compared to the previous year.

The Australian dollar (AUD) inward remittance contributed to more than half of the total remittances, with about Nu 5.34B (AUD 102.80M) followed by Nu 2.48B (USD 33.49M) in 2020. There were 3.5 times more AUD remittances in 2020 than in 2019.

Meanwhile, remittances in denominations such as pounds sterling, Euro, and other European currency roughly equated to Nu 758 M in 2020.

As of July of this year, the country’s remittance inflow was Nu 2.98B, the two highest being AUD at Nu1.89B and USD at Nu 953.35M.

The exchange rate of dollar against the Ngultrum increased slightly to Nu 74.18 in July this year and was Nu 73.72 for the fiscal year average (2020-2021).

Remittance through formal channels

With a drop of -90.03 percent in air transport under the transport, storage, and communication sector (8.74 percent of the country’s GDP) in 2020, remittances increased as Bhutanese abroad sent the foreign currency through formal banking channels.

Although not independently verified, many attribute the increase in remittance to non-resident Bhutanese sending money to support their families and relatives during the Covid-19 pandemic and lockdown in the country.

The RMA statistics show that the highest inward remittance amount of Nu 1.13B was received during the month of June 2020, followed by Nu 1.02B in November, and Nu 987.83M in July.

Bhutan confirmed its first Covid-19 case in March last year and the country saw the first 21-day nationwide lockdown beginning on August 11 last year. The second nationwide lockdown began on December 23 the same year.

Observers also say that the increase in remittance could be because it is sent through formal channels. “With the borders closed, there were not many Bhutanese returning home from abroad, especially Australia,” said one. “Remittance could have been higher in the past years, but it was not formally recorded, as some brought in cash.”

A Bhutanese working in Perth, Australia, Kezang Dorji said he sent money to support his parents during the lockdown and also to purchase properties in 2020.

Moreover, Kezang Dorji said that the increase in the limit ceilings of Tashi Bank Limited’s (TBL) T-Pay Remit to AUD 20,000 from AUD 10,000 per month per registered user has also contributed to the increase in remittances.

He added that they commonly use T-Pay Remit for the transaction, as the fee is much cheaper than through the Commonwealth Bank of Australia, which was the platform for the money transfer two years before.

T-pay Remit charges AUD 12 per transaction for up to AUD 10,000 and AUD 18 per transaction above AUD 10,000.

The Chief Executive Officer of Yala Real Estate, Kinzang Lhendup said that up to 90 percent of property buyers are Bhutanese living in Australia, and about 10 percent are from the United States of America.

According to the RMA report 2020, the sharp spike in inward remittances could be due to the increasing number of overseas expats returning due to the outbreak of Covid-19, who have remitted their savings back to Bhutan.

Statistics with the Ministry of Foreign Affairs shows that 10,248 Bhutanese came back home from March to December from 61 countries last year. Furthermore, 12,415 Bhutanese returned from 68 countries as of May this year.

To encourage remittance inflows, the RMA launched a cash incentive scheme for Bhutanese who live, work, or study overseas as a pilot phase from June 1 this year until May 22 next year.

The beneficiaries will receive a cash incentive of one percent upon converting the remitted amount into Ngultrum using the prevailing or applicable exchange rates through banking channels and the international money transfer operators.

The RMA launched RemitBhutan in September 2016 to provide a platform for non-resident Bhutanese to remit their savings and earnings to Bhutan through formal banking channels.

By the end of October 2020, the number of accounts opened through RemitBhutan grew by 19.6 percent (2,001 accounts). There are currently 2,347 accounts.

Meanwhile, remittance routed through Prabhu Money Transfer facility and T-Pay Remit initiated by TBL accounted for 83.84 percent of the total remittance as of October 2020. The remaining 16.16 percent was via Western Union and the normal banking channels of commercial banks.

Share prices gain momentum

Thukten Zangpo

The price of shares listed with the Royal Securities Exchange of Bhutan’s (RSEBL) stock market saw a gain of 35 points as of yesterday, as measured by the Bhutan Stock Index (BSI) in the secondary market.

The BSI was recorded at 1,035.52. The BSI saw a fall from January of last year dipping to 904.17, falling to its lowest ever on May 4, and remained in that range for a year. It saw a gradual gain only beginning in May of this year.

The BSI measures the stock market’s performance and serves as benchmarks for investors measuring the performance of their own investment portfolio.

It was set at 1,000 as the baseline on December 31, 2019. Gains above or drops below the baseline indicate the price change.

Chief Executive Officer of RSEBL, Dorji Phuntsho, said the stock market reflects the sentiments of the investors. “The drop in BSI could be due to Covid-19, as people did not want to take risks,” he said.

The stock market is driven by investment avenues. “With the government’s interest waiver and loan deferment support, there was liquidity in the market and people invested in the stock market,” said a local economist on the gradual gain.

On April 22, the Royal Monetary Authority announced a 50 percent loan interest payment support kidu to grant from the National Resilience Fund to all eligible loan accounts who availed a loan prior to April 10, 2020, until June of next year.

Similarly, the government announced that all loans sanctioned as of June 30, 2020 would be eligible for deferment until June 2022.

An official from the policy division, RSEBL, Lhagyel, said that Bhutanese trade either by looking at the company’s performance or when they have money at hand to invest. He added that most of the companies’ share prices are in an upward trend.

Bhutan National Bank Limited and Royal Insurance Corporation of Bhutan Limited made up around 50 percent of the market shares and these two companies are currently dictating the BSI.

The market price of BNBL recorded Nu 34.35 per share as of yesterday compared to Nu 28 on April 23 of last year.

Similarly, RICBL’s Nu 70 per share on April 23 of last year was Nu 72.50 as of yesterday.

Also, Bhutan Insurance Limited was recorded at Nu 62 per share yesterday from Nu 39 in April 23 of last year, Bhutan Board Products Limited’s Nu 42 from Nu 17.03, Druk Wang Alloys Limited’s (DWAL) Nu 106 from Nu 84.55, and Tashi Bank Limited’s Nu 48.30 from Nu 37.

The market capitalization, which is the value of shares at the current market of 19 companies, was recorded at Nu 51.442 billion as of yesterday.

The sellers cannot sell the shares below or above five percent of the market price to avoid volatility. This practice is known as a circuit breaker in the stock trade.

For example, if the market price of a share is Nu 100, the allowable price range is between Nu 95 and Nu 105.

“Higher stock price volatility often means higher risk and it helps an investor to estimate the fluctuations that may happen in the future,” Lhagyel said.

The secondary market traded 4.22 million (M) shares worth Nu 217.96 million as of June 30 of this year.

Similarly, Nu 24.69M shares worth Nu 863.59M were traded in 2020 as compared to the total traded volume of 23.61M shares worth Nu 1.12B in the previous year, an increase of 4.57% in volume and a decrease of 23.29% in value. The secondary market is a platform where investors buy and sell securities they already own.

The share trading takes place five times a week in five working days. BNBL, RICBL, GIC-Bhutan Re-Limited, DWAL, and Sherza Ventures Limited are the top five most traded shares.

Edited by Tshering Palden