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    Bhutan’s Indian Rupee Shortage: Macroeconomic Causes and Cures

    Ura, Karma | September 2015
    Abstract
    With over 74% of Bhutan’s trade taking place with India, ample holdings of Indian rupee reserves are critical for trade, a lot of which includes importing essential food items from India. In addition to trade, much of Bhutan’s public debt, and even private consumption debt for Indian sourced consumption goods—which has been growing along with rapid economic growth—is denominated in rupees. Servicing this debt thus also necessitates rapid conversion of ngultrum to rupees. In 2011, these combined pressures on rupee holdings extended to levels unable to be matched by official rupee holdings, resulting in what has come to be known as the liquidity or rupee crisis. This paper analyzes the causes and cures of the Indian rupee crisis and finds that excessive monetary growth, inflation differentials between India and Bhutan, and terms of trade imbalances were key factors in the Bhutanese liquidity crisis. It provides recommendations for the ongoing management of rupee reserve holdings.
    Citation
    Ura, Karma. 2015. Bhutan’s Indian Rupee Shortage: Macroeconomic Causes and Cures. © Asian Development Bank. http://hdl.handle.net/11540/9744.
    ISSN
    2313-5867(Print)
    2313-5875(e-ISSN)
    Keywords
    Risk Financing
    Regional Development Finance
    Public Finance
    Infrastructure Financing
    Financing of Infrastructure
    Financial Security
    Financial Intermediation
    Finance And Trade
    Enterprise Financing
    Trade Regulation
    Trade Finance
    Regional Trade Agreements
    General Agreement On Tariffs And Trade
    Foreign and Domestic Financing
    Cybersecurity
    Taxation
    Business Financing
    Investment Requirements
    Capital Needs
    Tax Incentives
    Project Risks
    Tariff agreements
    Customs conventions
    Import policy
    Export policy
    International Monetary Relations
    Local Finance
    Banks
    Capital Market
    financial statistics
    Foreign trade
    Digital
    Investments
    Finance
    Market
    Markets
    Use tax
    Tax administration and procedure
    Taxing power
    Effect of taxation
    Business enterprises
    Foreign trade and employment
    Mentoring in business
    Trade routes
    Bills of exchange
    Swaps
    International banks and banking
    Capital movements
    Central banks and banking
    Bills of exchange
    Swaps
    Banks and banking
    Stock exchanges
    Market
    Exchange
    Balance of trade
    Cyber Security
    e-commerce
    Show allCollapse
    Citable URI
    http://hdl.handle.net/11540/9744
    Metadata
    Show full item record
    Thumbnail
    SAWP_40_Bhutan's_web-ready.pdf (821.0Kb)
    Author
    Ura, Karma
    Theme
    Finance
    Trade
    Labor Migration

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    Copyright 2016-2020 Asian Development Bank Institute, except as explicitly marked otherwise