世界发展银行-Country-Partnership-Framework-for-the-Kingdom-of-Bhutan-for-the-Period-FY2021-24_72页_2mb

Country Partnership Framework for Bhutan (FY2021-24) Summary

Core Content

The Country Partnership Framework (CPF) for Bhutan, covering the fiscal years 2021–2024, outlines a strategic approach to support Bhutan's development goals in alignment with its unique philosophy of Gross National Happiness (GNH) and its constitutional commitment to environmental and cultural preservation. The CPF is based on the 12th Five-Year Plan (FYP) and integrates lessons from the previous Country Partnership Strategy (CPS), the 2015 GNH Index, and the 2020 Systematic Country Diagnostic (SCD). It also incorporates stakeholder feedback and the World Bank Group (WBG)’s Twin Goals of ending poverty and promoting shared prosperity.

Main Development Challenges and Priorities

2.1 Social and Political Context

• Bhutan is a small, landlocked country in the Himalayas with a population of about 735,000 and a high proportion of forest coverage (over 70%).
• The country is one of the most sparsely populated in the world, with settlements spread across steep mountains and valleys.
• Bhutan has preserved its political independence and cultural heritage, transitioning from an absolute monarchy to a democratic constitutional monarchy with stability and continuity.
• The current government, elected in 2018, is the third elected government, and the political environment is stable with a strong governance record.

2.2 Recent Economic Developments and Macroeconomic Outlook

• Bhutan’s economy is heavily reliant on hydropower and tourism, which together account for a significant share of GDP, exports, and government revenue.
• Hydropower contributes about 26% of GDP, 28% of exports, and 22% of domestic revenues.
• Tourism is the leading sector for foreign direct investment (FDI), but the total FDI inflow is low, around US$6.5 million in 2017 and US$24.5 million in 2018.
• The COVID-19 pandemic has significantly disrupted Bhutan’s economy, especially the tourism and hydropower sectors.
• Economic growth is expected to decline from 3.8% in FY2018/19 to 1.5% in FY2019/20, far below the pre-pandemic forecast of 5.5%.
• Inflation has risen due to food price volatility, reaching 4.5% in June 2020, with a peak of 9.2% in April 2020.
• The current account deficit (CAD) is expected to narrow from 22.5% of GDP in FY2018/19 to 14% in FY2019/20, but exports of non-hydro goods and services have been severely affected due to border closures and reduced external demand.

2.3 Poverty Profile

• Poverty has declined significantly from 36% to 12% between 2007 and 2017 based on the $3.20/day poverty line.
• However, malnutrition remains a concern, particularly in remote areas.
• The demographic dividend presents a unique opportunity, but the lack of competitive jobs in the private sector hinders youth employment and economic growth.

2.4 Main Development Challenges

• Nascent private sector: Limited job creation capacity and a lack of competitive jobs.
• Dependence on hydropower: High vulnerability to climate shocks and macroeconomic volatility.
• Regional integration: Limited export markets and financing sources beyond India.
• Human capital development: Inequitable access to education and healthcare, especially for rural and marginalized populations.
• Climate change and disaster risk management: Need for sustainable practices and risk mitigation strategies.
• Digital and physical infrastructure: Insufficient to support a growing private sector and regional integration.
• FDI and tourism: Low FDI inflows and reliance on a narrow range of sectors.

Strategic Focus Areas and Objectives

3.4.1 Human Capital

• Objective: Strengthen the supply side of jobs and support early childhood development.
• Approach: Life-cycle support for mothers and children, including education, health, and nutrition.
• WBG Role: Promote equitable and sustainable development through education, health, and skill-building programs.

3.4.2 Resilience

• Objective: Build economic and environmental resilience to mitigate the impact of shocks.
• Economic Resilience:
  • Support government efforts to recover from the economic downturn and maintain macroeconomic stability.
  • Promote private sector-led job creation, especially in rural areas.
  • Intervene in sectors like cottage and small industries (CSIs) and high-value agribusiness.
  • Improve financial inclusion through microfinance and digital financial services.
• Environmental Resilience:
  • Shift from conservation to sustainable use of natural resources.
  • Enhance climate and disaster risk management to protect forest cover and biodiversity.

3.4.3 Natural Resource Management

• Objective: Promote sustainable use and conservation of natural resources.
• Key Areas: Forest management, biodiversity protection, and climate change mitigation.
• WBG Support: Assist in developing sustainable practices and managing risks associated with natural resource exploitation.

3.4.4 Managing Climate Change and Disaster Risk

• Objective: Strengthen disaster risk management (DRM) and climate resilience.
• WBG Role: Support policy reforms, infrastructure development, and risk mitigation strategies.

3.4.5 Strengthening Cross-Cutting Foundations

• Objective: Enhance citizen engagement, financial management, and public-private partnerships.
• WBG Support: Facilitate participatory approaches, improve procurement systems, and promote regional cooperation.

Implementation Approach

3.5.1 Financial Management and Procurement

• The WBG will support financial inclusion and transparent procurement.
• A focus on electronic government (eGP) and alternative procurement arrangements (APA) to improve efficiency and accountability.

3.5.2 Citizen Engagement

• Promote participatory development and community-driven solutions.
• Enhance access to public services and governance through improved citizen engagement.

3.5.3 Partnerships and Donor Coordination

• Leverage regional programs and technical assistance (TA) to support Bhutan’s integration with neighbors.
• Coordinate with international organizations and donors to align efforts with national priorities.

Key Risks and Mitigation

• External debt distress: Bhutan’s external debt is high (105% of GDP in 2018/19), primarily due to hydro-related borrowings.
• Dependence on India: Exporting surplus hydropower to India creates economic vulnerability.
• Pandemic impact: Continued disruptions to tourism, trade, and public services may affect growth and employment.
• Inflationary pressures: High food price inflation remains a challenge, especially in the short term.

Conclusion and WBG’s Role

• The CPF emphasizes job creation as the overarching priority, aligning with Bhutan’s demographic dividend and GNH principles.
• The WBG will support Bhutan in diversifying the economy, building resilience, and enhancing private sector growth.
• A balanced approach is needed to maintain Bhutan’s cultural and environmental commitments while fostering economic development and sustainable growth.
• The CPF integrates strategic focus areas, cross-cutting foundations, and regional integration to achieve inclusive and sustainable development.