Bhutan finance ministry received Nu 1.3B from the World Bank yesterday

In a move that will help government strengthen and develop its institutions and rural infrastructure, among others, the finance ministry received Nu 1.3B from the World Bank yesterday.

The fund is more of a concessional loan than commercial borrowing.

Finance minister Wangdi Norbu said the concessional loan is not related to any specific project, but can be used for different types of expenditure, like the building of schools, hospitals and other capital assets.

“However, the amount cannot be utilised in meeting recurrent expenditure,” he said, adding that government’s establishment cost will have to be met from internal revenue.

Of the total, Nu 1,086M will be channeled towards the development policy credit, which will strengthen government institutions to promote efficiency and effectiveness through sound fiscal and public financial management.

The rest of the amount will be used for additional financing of the decentralised rural development project, targeted at strengthening local government administration through capacity building at a local level.

Bhutan's World Bank representative, Mark LaPrairie said the rural development project was also aimed at providing increased access to market, farm roads and in increasing agriculture productivity of cash crops.

“It will also focus on rural infrastructure development, support improved technologies and in institutional strengthening of the renewable natural resources sectors,” he said.

The original amount, negotiated some time in March 2005, was at USD 7M.

During World Bank's managing director Dr Ngozi Okonjo-lweala’s visit last year, Bhutan was assured of receiving concessionary loans until 2014, despite the per capita income disqualifying the country from receiving the assistance.

Lyonpo Wangdi Norbu said such type of concessionary loans will soon become less common, as the country gradually sees a domestic growth and develops, in terms of the per capita income.

Meanwhile, the signing of the financing agreement was postponed, following the High Court ruling on constitutional validity of receiving loans, that was considered a money bill and demanded its approval through the parliament.

But the Supreme Court had clarified that the government could raise loans and make grants in accordance to the Public Finance Act.

The agreement signing between the finance minister Wangdi Norbu and World Bank’s vice president Isabel Guerrero yesterday also marked the opening of the bank’s new office in Thimphu.

Officials said it will facilitate the bank to work closely with different branches of the government.

World Bank remains one of Bhutan’s major development partners starting 1983. Since then, it has financed over 13 loan projects amounting to USD 150.127M and 20 grant projects amounting to USD 62.970M.