Bhutan - Overview of economy
In 2001 Bhutan's economy remained one of the smallest and least developed in the world, almost entirely dependent upon basic agricultural production, forestry, and hydroelectricity. In 2000 rural inhabitants constituted 92.9 percent of the total population, a slight decline from the 1990 level of 94.8 percent. A large majority of agricultural activity is subsistence-based and takes place outside of the monetized economy . In other words, subsistence farmers do not use the ngultrum (the national currency) in their day-to-day lives; they trade and barter goods for the few basic manufactured essentials that they might need. However, in 2000 the government cited indications that the monetized economy was experiencing substantial growth.
Bhutan is a very poor country with a GDP per capita of only US$197 (based upon a population of 1.03 million), although it is important to note that because the majority of subsistence farmers are outside of the monetized economy this figure is not an adequate representation of actual living standards.
After the serious attacks upon Buddhism in Tibet by the communist government in China during the late 1950s, Bhutan began to develop more links with India in order to counter the possibility of a similar fate. In 1960, Bhutan closed its borders with Tibet and, with considerable Indian financial and technical assistance, began to construct roads to link India with Bhutan. This action constituted a key turning point for Bhutan's economic development, and by 2001 the national economy was highly dependent upon Indian trade, aid, and investment.
It must be stressed that the government emphasizes the concept of "Gross National Happiness" (GNH) as an essential indicator and factor in Bhutan's development, a very specific approach to developmental ideology. The GNH idea stresses the importance of cultural heritage, the stability and protection of the natural environment, greater self-sufficiency, and human development. This approach, with its roots in the traditional Buddhist principles of compassion, compromise, and pragmatism, is in direct contrast to the globally dominant view of the primacy of economic and material development. As the government maintains in a policy document for the UNDP in 2000 that GNH "means that development is only valuable if it is an 'efficient means' to happiness and human development."
National debt in Bhutan is relatively stable and controllable in amount. The government has actually been able to reduce total public sector debt from US$139.5 million in 1993-94 to US$115.8 million by 1997-98. Consequently, over the same period debt service payments declined from US$17.6 million to US$9.6 million. Official development assistance from both individual governments and international financial institutions in 1997 consisted of US$59.9 million in grants and US$10.1 million in loans. The Asian Development Bank (ADB) made 2 loans to Bhutan in 2000. The first, of US$10 million, was to assist Bhutan in setting out a health reform program, The Bhutan Health Trust Fund, which has the aim of maintaining the free supply of medicines to the public. The second, of US$9.6 million, was for the regeneration of the country's primary road, the east-west highway. The ADB had made another loan of US$10 million in 1999 for a Sustainable Rural Electrification Project to provide electricity to the poorer and more remote areas of Bhutan.