The World Bank has officially approved $25 million in financing to bolster the Royal Government of Bhutan’s efforts in job creation and economic resilience. This initiative, titled the First Growth and Jobs Development Policy Financing, is designed to overhaul Bhutan’s policy and institutional frameworks. By strengthening fiscal and debt management while fostering a more robust environment for private sector investment, the program aims to shift the nation toward a more sustainable, market-led economy. This financing marks the first in a series of three operations, consisting of a $12.5 million grant and a $12.5 million concessional credit with a favorable 40-year repayment term.
The Finance Minister of Bhutan, H.E. Lyonpo Lekey Dorji, emphasized that this program is a critical component of the nation’s 13th Five-Year Plan. With an ambitious goal to reach high-income status by 2034, the government is prioritizing a dynamic business environment, quality infrastructure, and a highly skilled workforce. The minister highlighted that the current reforms are specifically aimed at generating high-quality employment opportunities for the youth, women, and vulnerable populations, ensuring that Bhutan’s development is both inclusive and forward-looking.
Currently, Bhutan faces a significant gap between its economic growth and the quality of available employment. Over 40 percent of the workforce remains in low-productivity agriculture, while high-quality roles are largely restricted to the public sector. The youth unemployment rate remains a pressing concern, currently sitting at five times the overall national average. This disparity has led many skilled young Bhutanese to seek opportunities abroad. Xavier Furtado, the World Bank Group Country Manager for Bhutan, noted that while the Kingdom has successfully reduced poverty, these reforms are essential to stimulate the private investment required to keep talent within the country.
To address these systemic issues, the financing will support several key regulatory changes. These include amending external commercial borrowing guidelines to allow local market participants to access international funding, expanding credit availability for business expansion, and improving the framework for foreign direct investment. Additionally, tax reforms are set to simplify the current system, lowering the corporate tax burden and reducing compliance costs. These measures are intended to encourage the formalization of businesses while enhancing domestic resource mobilization, creating a more “growth-friendly” fiscal landscape.
Beyond industrial and fiscal shifts, the program targets the vital agriculture sector and worker protections. Reforms will focus on strengthening farmer cooperatives and improving the efficiency of agricultural state-owned enterprises to promote commercialization. Simultaneously, the program aims to modernize the pension system and improve working conditions for the most vulnerable groups. By integrating these social protections with aggressive economic reforms, Bhutan and the World Bank are laying the groundwork for a diversified economy that promises better-paid jobs and long-term stability for all citizens.