AGP Executive Report

Performance-Linked Grants: Bhutan’s Ministry of Finance will start a new framework in FY 2026–27 to assess dzongkhags and thromdes on project delivery, budget execution and compliance, with 30% of capital block grants tied to results. Water Security: A National Water Resources Inventory report warns 227 water sources are drying in Paro and Thimphu, with 18 already dried up, pointing to climate change, forest degradation and human activity. MoICE Delivery Push: MoICE says it hit 192 of 193 KPIs in 2025–26 (99.5%), including plans to establish 2,000 new industries and attract Nu 10bn FDI, but one gap remains in intellectual property service revenue. Cross-Border Cost Pressure: Phuentsholing retail leakage is worsening as 94.9% of residents rely on Jaigaon for some shopping, mainly due to lower prices, turning border shopping into a cost-of-living issue. Tourism Beyond the West: Arrivals jumped to 149,141 in the first half of 2026, but the big question is whether spending is reaching central, eastern and southern communities. Matsutake Market Reality: Exporters in Genye say rising demand in Japan can’t be met—only 3.5–4 tonnes shipped versus buyers’ needs of at least eight tonnes—while the Matsutake Festival is drawing visitors and boosting local income. Legal Services Demand: The Office of the Attorney General handled 1,014 cases in 2025–26, with drug-related offences forming the largest share.

Disaster Preparedness: Bhutan’s Thimphu earthquake drill (7.5 scenario) with Nepal’s NSET support flagged gaps in emergency equipment and resource mobilisation, testing coordination among authorities, hospitals and responders under the Thimphu Earthquake Contingency Plan. Energy & Investment: Druk Holding Investments is moving beyond hydropower by advancing geothermal exploration at 11 hot spring sites, supported by the World Bank, ÍSOR and KenGen, as part of its 10X Roadmap. Business & Tourism: Bumthang operators want more tourism facilities and attractions after low occupancy keeps hotels underutilised, with some reporting only single-digit occupancy outside peak months. Trade & Costs: Informal trade and taxes/regulations are squeezing businesses in Phuentsholing, while a separate regional disruption shows how cross-border policy shifts can quickly raise project costs. Crypto Policy Debate: A new push argues that banning crypto isn’t working and Bhutan should focus on regulation instead.

Cross-border trade pressure: A third-month halt on Indian stone imports is disrupting Burimari Land Port trade, forcing traders to move more loads per truck, pushing up Bangladesh stone prices and raising costs on fixed-price projects. Digital payments expansion: UPI is already accepted in Bhutan and several other countries, while broader coverage highlights how India’s payment rails are enabling new fintech services. Rural income boost: Matsutake prices are lifting incomes in Genye Gewog, where collectors and exporters are seeing better returns and festival-linked sales. Disaster readiness: Thimphu’s 7.5 earthquake drill exposed emergency equipment and coordination gaps, with Nepal providing technical support. Highland support: Bhutan’s Home Affairs Ministry is setting up a Special Technical Committee to assess highlanders’ winter livelihood challenges across 10 districts. Tourism business strain: Bumthang businesses are urging more tourism facilities and attractions as occupancy remains low despite national visitor numbers. Informal trade squeeze: In Phuentsholing, informal cross-border goods movement is undercutting compliant formal importers through avoided taxes and procedures. Energy market shift (region): Nepal’s energy sector is moving from shortages to market management as surplus production grows and PPAs expand.

Disaster Preparedness: Thimphu ran a full-scale earthquake drill for a 7.5 scenario, exposing gaps in emergency equipment and resource mobilisation while testing the Thimphu Earthquake Contingency Plan with Nepal’s technical support. Tourism & Local Business: Bumthang business owners say low occupancy and limited attractions are hurting hotels and other services, urging more tourism facilities and private investment after weak visitor distribution. Trade & Compliance: In Phuentsholing, informal trade through private vehicles is undercutting formal importers by letting some traders dodge taxes, customs steps and regulatory costs. Labour Conditions: Bhutan’s private security guards report low wages despite long shifts, raising concerns about how businesses manage essential services. Agriculture & Policy: A call is making the rounds that Bhutan should treat agriculture as an economic mandate to secure the food future. Hydro & Investment Linkages: JSW Energy and Bhutan’s DGPC signed pacts tied to the 920 MW Punatsangchhu-III hydro project, reinforcing cross-border energy investment momentum. Highland Support: The Home Affairs Ministry is setting up a special technical committee to assess winter and livelihood challenges for highland communities, starting with 10 districts including Thimphu and Bumthang.

Tourism & Local Business Pressure: Bumthang businesses are pushing for more tourism facilities and attractions after persistently low occupancy, with hoteliers saying they can work only a few months and then struggle to sustain operations. Trade & Compliance Gap: In Phuentsholing, informal trade carried by private vehicles and informal distribution networks is undercutting formal importers by avoiding taxes, customs steps, and regulatory costs. Private Security Wages: Bhutan’s private security guards report long shifts and low pay despite guarding public and private premises, raising concerns about labour conditions in the services sector. Budgeting for Highland Resilience: Thimphu district’s capital allocations for 2026-27 are being shaped by poverty, climate risks, GNH indicators and transport needs, reflecting how planning criteria can steer local economic outcomes. Highlanders Support Plan: The Home Affairs Ministry is setting up a Special Technical Committee to assess winter and livelihood challenges for highland communities, with district representatives from key highland areas. India-Bhutan People-to-People Ties: Bhutan’s King met India House officials and Bhutan India Friendship Association leaders in Thimphu, underscoring continued cooperation on development, energy, trade, and connectivity. Trade Deficit Watch: Bhutan’s Q2 trade deficit widened to nearly Nu 24bn as imports rose faster than exports, with fuel, food, smartphones and vehicles driving the import bill.

Hydropower Deal: JSW Energy and Bhutan’s Druk Green Power Corporation (DGPC) signed a shareholders’ agreement to jointly develop the 920 MW Punatsangchhu-III project, with DGPC holding 51% and JSW Neo Energy 49%, and detailed project work now underway. Trade & Reserves: Bhutan’s trade deficit widened to nearly Nu 24bn in Q2 as imports hit about Nu 42.7bn, driven by fuel, food, smartphones, vehicles and networking gear; India remains the biggest import source. Local Budgeting: Thimphu District allocated about Nu 706M for 2026-27, with gewog funding shaped not just by population but also poverty, climate risks, GNH indicators and transport needs. Cordyceps Market: In Naro, some cordyceps collectors held back sales after auction prices disappointed, citing limited buyer competition and uncertainty over future trade. Mental Health Services: PEMA expanded mental health and protection services nationwide, including helpline 1098, school and community support, and maternal mental health screening across all 20 dzongkhags. Tax Clarity: Bhutan’s Finance Ministry clarified that fixed-deposit interest earned before Jan 1, 2026 stays tax-exempt even if credited later.

Trade & Finance: Bhutan’s trade deficit widened to nearly Nu 24bn in Q2 as imports hit about Nu 42.7bn, up from Nu 37bn in Q1; fuel (diesel/HSD), smartphones, vehicles and networking gear drove the bill, while exports lagged—India remained the biggest partner for imports (Nu 32.4bn) and exports (Nu 10.5bn). Hydropower Investment: JSW Energy and Bhutan’s DGPC signed a shareholders’ agreement to jointly develop the 920MW Punatsangchhu-III project in Wangdue Phodrang, with DGPC holding 51% and JSW Neo 49%; DPR work is underway, marking JSW’s first power generation venture outside India. Local Governance & Planning: Thimphu district allocated about Nu 706M for 2026-27 capital spending, with gewog shares shaped by poverty, climate risks, GNH indicators and transport needs—not just population or area. Tax Clarity: Bhutan’s Finance Ministry clarified that interest earned on fixed deposits before Jan 1, 2026 stays tax-exempt even if credited later under the new Income Tax Act. Digital Economy & Connectivity: A Bhutan dialogue pushed people-centred digital transformation as AI and online risks grow, while India’s e-visa entry points expansion (including Jaigaon and Darranga) supports Bhutan-related travel flows. Social Policy: The Third Child Plus Programme confirms monthly support for eligible families, including Bhutanese living abroad who opt in. Business Signals: Page Industries reported Q1 FY27 revenue up 7.9% to Rs 1,420.44 crore, though net profit fell 4%—a reminder that demand can stay steady even as costs squeeze margins.

Hydropower Deal: JSW Energy and Bhutan’s Druk Green Power Corporation (DGPC) signed a shareholders’ agreement to jointly develop the 920MW Punatsangchhu-III project in Wangdue Phodrang, with DGPC holding 51% and JSW Neo 49%; the detailed project report is now being prepared. Tax Clarity: Bhutan’s Finance Ministry clarified that interest earned on fixed deposits before Jan 1, 2026 stays tax-exempt even if credited after the new Income Tax Act took effect. Tourism & Connectivity: Bhutan added Darranga (Assam) and Jaigaon (West Bengal) as entry/exit points for foreign nationals holding Indian e-Visas, aiming to boost access for eastern Bhutan. Local Development: Haa Dzongkhag lifted its construction moratorium inside the Haa Throm boundary, restarting approvals under revised local planning rules. Trade Risk Alert: India’s DGFT advised exporters and banks to exercise heightened vigilance with two Bhutan-based firms, Legoy Powersports and Druk A-Z Store, citing unresolved trading risks. Tourism Momentum: July arrivals nearly doubled year-on-year to 14,913 international visitors, with Indians still the largest share. Digital Governance Dialogue: Bhutan held a high-level dialogue on inclusive digital transformation and responsible digital governance as online services and payments expand.

Hydropower Deal: JSW Energy and Bhutan’s Druk Green Power Corporation (DGPC) signed a shareholders’ agreement to jointly develop the 920 MW Punatsangchhu-III hydro project in Wangdue Phodrang, with DGPC holding 51% and JSW Neo 49%; the detailed project report is now being prepared. Tax Clarity: Bhutan’s Finance Ministry clarified that interest earned on fixed deposits before Jan 1, 2026 stays tax-exempt even if credited later under the new Income Tax Act. Cross-Border Trade & Retail: A Bhutan study finds 94.9% of Phuentsholing residents shop in Jaigaon for at least some goods, driven mainly by lower prices and wider choice, while local retailers face higher costs and fragmented supply chains. Tourism Momentum: Bhutan’s July 2026 international arrivals nearly doubled to 14,913 (up 98.5% year-on-year), led by India (65.5% of visitors). Local Business Risk Watch: India’s DGFT issued a trade notice advising heightened vigilance over two Bhutan-based firms, Legoy Powersports and Druk A-Z Store, citing unresolved trading risks and lack of response. Digital Governance: Bhutan held a high-level dialogue on inclusive digital transformation and responsible digital governance as public services and payments move online.

Cross-Border Hydropower Deal: JSW Energy and Bhutan’s Druk Green Power Corporation (DGPC) have signed a shareholders’ agreement to jointly develop the 920 MW Punatsangchhu-III project in Wangdue Phodrang, with DGPC holding 51% and JSW Neo 49%; DPR work is underway. Tourism Momentum: Bhutan’s international arrivals surged in July 2026, nearly doubling to 14,913 visitors (up 98.5% year-on-year), with Indians still the biggest share. Business & Trade Risk Controls: India’s DGFT has issued a trade notice advising “heightened vigilance” when dealing with two Bhutan-based firms, citing unresolved concerns and urging due diligence. Food Safety at the Border: BFDA tightened mango import testing and rules after calcium carbide was detected in consignments, expanding lab checks and enforcement. EV Affordability Watch: Bhutan says EVs keep strong tax advantages, but it will assess the market before adding more incentives as it targets 70% of new vehicle sales to be electric by 2035. Banking Oversight: RMA is reviewing Bhutan National Bank after customers reported double deductions of annual maintenance charges affecting over 54,000 accounts. Local Economy Pressure: A study finds Phuentsholing residents increasingly shop in Jaigaon due to lower prices and higher choice, putting local retailers under strain. Minerals Prospecting: Bhutan’s airborne survey flagged promising copper and tungsten targets (plus rare earth and geothermal potential), with ground studies needed next.

Cordyceps Market Watch: Many collectors in Naro Gewog held back sales after auction prices fell below expectations, citing limited buyer competition and uncertainty in the trade; earnings ranged from Nu 190,000 to Nu 936,000 depending on quality and quantity. Mental Health & Safety Nets: PEMA expanded mental health and protection services nationwide, including prevention, early intervention, specialised treatment and reintegration, plus maternal mental health screening in all 20 dzongkhags and wellbeing training for teachers. State vs Jobs: A Finance Ministry report says SOEs drive 23.06% of Bhutan’s GDP in 2023 but employ only 3.55% of the workforce, reflecting their capital-heavy focus in sectors like hydropower and finance. Hydropower Deal: JSW Neo and DGPC signed a pact to jointly develop the 920 MW Punatsangchhu-III project, with DGPC holding 51% and JSW Neo 49%, and DPR work underway. Banking Oversight: RMA is reviewing Bhutan National Bank after some customers faced double deductions of annual maintenance charges affecting 54,000+ account holders. Food Safety: BFDA tightened mango import testing and rules after calcium carbide was detected in consignments, with further surveillance following initial positive samples. EV Policy: Government will assess the EV market before considering extra incentives, even as EVs keep tax advantages over conventional vehicles. Tourism Pulse: July saw international arrivals nearly double year-on-year to 14,913, led by India (65.5%). Trade Risk Alert: India’s DGFT issued a notice urging heightened vigilance with two Bhutan-based firms, citing unresolved trading risks.

Bhutan Economy & Energy: Bhutan’s economy grew 8.52% in real terms in 2025, driven by stronger electricity generation after the Punatsangchhu-II hydropower plant came online, alongside gains in finance, construction and ICT. Tourism Demand: Bhutan’s tourism rebound stayed strong in July, with international arrivals nearly doubling year-on-year to 14,913, led by Indian visitors (65.5%). Business Reforms: Government says it has accelerated policy, regulatory and industrial reforms to improve the business climate, attract investment and support cottage and small industries, including eased FDI rules and faster approvals. EV Policy: Bhutan will assess the EV market before adding incentives for private buyers, even as EVs keep favourable tax treatment under recent reforms. Food Safety & Imports: BFDA tightened mango import controls after calcium carbide was detected in some consignments, expanding lab testing and risk-based oversight. Banking Oversight: RMA is reviewing Bhutan National Bank after reports of double deduction of annual maintenance charges affecting 54,000+ account holders, with possible penalties if lapses are found. Mining Prospects: A nationwide airborne survey flagged promising copper and tungsten targets (plus rare earth and geothermal potential), but officials stress ground studies are needed to confirm viability. Education Access: MoESD is intensifying efforts to curb school dropouts and non-enrolment, citing poverty, migration, distance and learning difficulties. Trade Risk Advisory: India’s DGFT issued a caution to exporters and banks over two Bhutan-based firms, urging heightened vigilance and due diligence.

Business Reforms: Bhutan has accelerated a package of policy, regulatory, financial and industrial reforms to improve the business climate, attract foreign investment and expand cottage and small industries, including eased FDI rules, faster approvals and concessional support. Economic Performance: Bhutan’s economy grew 8.52% in real terms in 2025, led by stronger electricity generation, finance/insurance, construction and ICT, while mining and some services slowed. EV Policy: The government says electric vehicles keep major tax advantages under the latest reforms, but it will assess the EV market before adding further incentives for private buyers. Banking Oversight: The Royal Monetary Authority is reviewing Bhutan National Bank after customers reported double deductions of annual maintenance charges affecting 54,000+ account holders, with possible penalties if lapses are found. Food Safety & Trade: BFDA tightened mango import rules after calcium carbide was detected in some consignments, expanding laboratory testing and risk-based controls. Mining Prospects: Bhutan identified promising copper and tungsten prospects, plus rare earth and geothermal signals, from its first nationwide airborne survey, with ground studies still needed to confirm viability. Education Access: MoESD stepped up efforts to curb school dropouts and non-enrolment, citing poverty, migration, distance and learning difficulties. Infrastructure & Industry: Thimphu Thromde’s clearance of encroachments at Olakha supports road works and pothole repairs, while Samtse’s industrial parks are expanding space for dozens of industries with new investment. Energy Expansion: Under the 13th Five-Year Plan, Bhutan is pushing further hydropower and solar growth to strengthen energy security and support long-term economic transformation. Tourism & Investment: Bhutan’s business reforms and energy push are framed as part of a wider drive to strengthen domestic industry and investment opportunities. Regional Trade Link: India added e-Visa entry points, including two on the India-Bhutan border (Jaigaon and Darranga), potentially improving travel access for Bhutan-related business and tourism. Sports & Culture: Thukten Nyendra won “Rhythm of Bhutan” 2026 and will represent Bhutan at Eurovision Asia, adding a fresh spotlight on Bhutan’s creative economy.

Bhutan Trade & Industry: Bhutan’s BFDA tightened controls on imported Langra mangoes after calcium carbide was found in 12 of 34 samples, requiring testing before release; last year’s imports were over 1,100 tonnes worth nearly Nu 80M. Energy & Resources: Bhutan’s renewable push under the 13th Five-Year Plan is accelerating hydropower and solar expansion, targeting 15,000MW of new hydropower and 5,000MW solar by 2040, alongside new mineral findings including tungsten, copper and rare earth potential. Tourism & Border Business: The 24-hour SDF waiver will expand beyond Rinchending from September, letting regional visitors join approved packages to visit Milarepa Lhakhang and the Pachu Community Ecotourism site, aiming to turn the border town into a destination. Economy Watch: Bhutan’s foreign reserves fell by about USD 31M between June and July to USD 1.19B, with fuel import costs and ngultrum depreciation cited as key pressures. Infrastructure & Local Economy: Thimphu Thromde’s clearance of scrap and encroachments at Olakha supports road repairs and pothole fixes, but workshop owners worry about construction impacts on customer flow.

Bhutan’s Mineral Push: Bhutan’s first nationwide airborne geophysical survey has flagged promising targets for copper, tungsten and rare earth elements, with the Department of Geology and Mines moving to ground validation and drilling to verify commercial potential. Renewables Expansion: Under the 13th Five-Year Plan, Bhutan is accelerating hydropower and solar to strengthen energy security, with plans for major new capacity additions by 2040. Samtse Industry Drive: Samtse’s industrial transformation is gaining momentum as two industrial parks—Dhamdum and Norbugang—attract about Nu 1.72 billion in investment and create space for dozens of industries. Tourism Access Update: Bhutan’s 24-hour SDF waiver will expand beyond Rinchending from September, letting regional visitors reach Milarepa Lhakhang and the Pachu Community Ecotourism Site via approved packages. Food Safety Controls: BFDA has tightened checks on imported Langra mangoes after calcium carbide was detected in multiple samples, requiring testing before market release. Public Policy Clarification: The Third Child Plus Programme now explicitly covers eligible Bhutanese families living abroad, easing uncertainty for overseas households. Reserves Watch: Bhutan’s foreign reserves fell by about USD 31M to around USD 1.19B, with fuel and higher import costs cited as key pressures. Digital Connectivity: Bhutan’s Third International Internet Gateway is targeting an early-2027 launch, aiming to improve long-term affordability and connectivity. EV Transition: Bhutan is eyeing fuel savings of Nu 7.5 billion by 2030 through rapid EV adoption.

Minerals & Strategy: Bhutan’s first nationwide airborne geophysical survey is pointing to promising targets for copper, tungsten, and rare earth elements, with DGM moving to ground validation via sampling and drilling—potentially reshaping Bhutan’s export story beyond construction minerals. Renewables Push: Under the 13th Five-Year Plan, Bhutan is accelerating hydropower and solar expansion, targeting about 15,000MW of new hydropower and 5,000MW solar by 2040 to reach 25GW cumulative capacity. Industrial Growth in Samtse: Two industrial parks in Samtse—Dhamdum and Norbugang—are attracting about Nu 1.72B in investment and now provide space for 75 industries, supporting manufacturing and heavy industry. Tourism Facilitation: Bhutan’s 24-hour SDF waiver will expand beyond Rinchending from September, allowing visitors to join approved packages to Milarepa Lhakhang and the Pachu Community Ecotourism Site. Food Safety & Trade: BFDA tightened controls on imported Langra mangoes after calcium carbide was detected in 12 of 34 samples, requiring testing before release. Public Policy for Families Abroad: Government clarified that Bhutanese families living overseas are eligible for the Third Child Plus Programme. Energy Partnership Angle: India and Bhutan are deepening cooperation on power and water, with renewed focus on hydropower and cross-border electricity. Crypto Treasury Watch: Reports say the Royal Government has continued selling Bitcoin from its Gelephu Mindfulness City-linked treasury, with another tranche offloaded to Binance. Reserves Update: Bhutan’s foreign reserves fell by about USD 31M between June and July, pressured by higher fuel import costs and ngultrum depreciation.