March 15, 2010

Monetary Policy of Bhutan

ROYAL MONETARY AUTHORITY OF BHUTANResearch & Statistics Division

(Financial Literacy Program)

GOPAL GIRIResearch Officer

Outline2

Introduction Conduct of Monetary policy Conclusion

3

Introduction

RMA’s functions – Monetary policy Monetary policy targets

Conduct of monetary policy4

Maintaining of Peg Volume of money & credit – CRR and SLR,

RMA Bills, prudential measures

Conduct of Monetary policy (2)5

Conduct of Monetary policy (3)Conduct of Monetary policy (3)6

a. Alignment of domestic interest rate with India

RMA liberalized interest rate in 1997 Targets- promote investment and market

b. Government Treasury Bills Monetary policy instrument- Establish

Repo/Reverse Repo, bench-mark rates Short term fiscal management tool

9 December 2009

Conduct of Monetary policy (4)Conduct of Monetary policy (4)7

Need for effective Rupee management in Bhutan

-Correct BOP position with India

-Monitor inflows and outlows of Rupees

-Maintaining proper account for Rupee in circulation

Importance for Bhutan and for all Bhutanese to use Rupee more prudently

9 December 2009

ConclusionConclusion8

Limited Independent Monetary policy- close economies ties with India.

Promoting RMA’s defend mechanism to safeguard Peg Arrangement- Indian Rupee management

Rupee continue to be a legal tender in Bhutan Current best option for Bhutan to continue with

Peg Arrangement

9 December 2009

THANK YOU