ADB Approves $17.4 Million Support Package to Shield Bhutan From Rising Costs

To help address these challenges, ADB has approved a financing package worth $17.42 million under a broader effort to reduce the impact of external economic shocks.

Bhutan will receive new financial support from the Asian Development Bank (ADB) as the country works to protect households and maintain essential public services amid economic pressures linked to the ongoing conflict in the Middle East. Rising fuel and commodity prices have increased costs across the economy, placing additional strain on families, businesses and government finances.

To help address these challenges, ADB has approved a financing package worth $17.42 million under a broader effort to reduce the impact of external economic shocks. The funding will support government measures intended to keep basic goods affordable, protect vulnerable groups and sustain important public services during a period of rising import costs.

The assistance forms part of Bhutan's $267.88 million Anti-Crisis Action Plan, which was created to lessen the economic effects of higher fuel and food prices. Given Bhutan's reliance on imported energy and essential commodities, fluctuations in international markets can quickly affect household budgets and economic activity throughout the country.

Support for Families and Essential Needs

ADB President Masato Kanda said rising fuel prices affect all households, though lower-income families face the greatest burden when essential costs increase. He noted that Bhutan is responding through practical measures that directly support citizens, including school meal programs and assistance for household expenses.

The ADB package is being delivered through the Enhancing Resilience with Countercyclical Expenditures Program. It includes a $13.45 million grant from the Asian Development Fund and a $3.97 million loan from ADB's ordinary capital resources.

A key component of the program provides monthly financial assistance of up to 10,000 ngultrum (about $104) for women in eligible large families. Rural households will also receive support to help manage energy expenses during a period of elevated fuel costs.

Expanded School Feeding and Price Relief Measures

The government will expand school feeding programs to ensure children continue receiving nutritious meals despite rising food prices. The initiative is designed to reduce pressure on families and support student well-being.

To keep everyday necessities within reach, the program will extend tax exemptions on several essential goods. These include staples such as rice, butter, refined cooking oil and salt, along with items including sanitary napkins and wheelchairs. Officials expect the tax relief measures to help reduce inflationary pressure on household spending and improve affordability for vulnerable groups.

Protecting Jobs and Public Services

Part of the funding will support small-scale public works projects across Bhutan's districts and subdistricts. These projects are intended to maintain employment opportunities and ensure that local public services continue operating effectively. The program also includes measures to strengthen fuel security through the replenishment of fuel storage facilities. These actions are expected to improve the country's ability to manage supply disruptions and price volatility.

The government plans to encourage greater adoption of clean transportation as part of the response package. Funding will support the procurement of 45 electric buses for urban and interdistrict services. The investment is expected to reduce dependence on imported fuel, improve public transportation options and contribute to Bhutan's environmental goals.

Economic Challenges and Outlook

Bhutan remains particularly exposed to external economic shocks because of its dependence on imported food and fuel and its relatively limited domestic revenue base. Higher energy and commodity costs have affected trade activity and sectors such as tourism, contributing to slower economic growth and rising economic pressures.

ADB forecasts Bhutan's economic growth will ease from 8.5% in 2025 to 6.5% in 2026 before improving to 7.2% in 2027 as conditions stabilize.

The financing package forms part of ADB's broader regional response to the economic consequences of the Middle East conflict across Asia and the Pacific. Through this support, Bhutan is seeking to protect vulnerable households, sustain essential services and strengthen economic resilience during a period of global uncertainty.