Bhutan faces grain shortages and soaring prices

(Refiles to remove superfluous word in title)

By Gopal Sharma and Manoj Kumar

KATHMANDU/NEW DELHI (Reuters) – Rising fuel import costs and global grain shortages have led to soaring domestic prices, posing a risk of food shortages for people in Bhutan, especially in rural areas, Economic Affairs Minister Loknath Sharma told Reuters. Thusday.

Bhutan, with a population of less than 800,000, is dealing with the impact of war in Ukraine – which has caused global crude oil and grain prices to soar – after its economy began to recover at as pandemic restrictions ease.

“Food scarcity could fuel inflation,” Sharma told Reuters, adding that the government was concerned about the impact of export restrictions on grains by some countries, although it did not have them. not named.

Bhutan, which depends on imports to meet food demand, imported cereals worth $30.35 million, mainly rice and corn, in 2021.

Local industry leaders said India’s recent curbs on wheat exports had fueled fears of a further rise in local prices, although New Delhi said it would continue to export to vulnerable and neighboring countries.

Sangay Dorji, Secretary General of Bhutan Chambers of Commerce and Industry, said rising food prices would hurt the local economy: “We are deeply concerned about the food supply… after inflation fuel, it will make the situation worse.”

A strict zero-COVID policy and the vaccination of more than 90% of the population has hurt economic growth in Bhutan, nestled between China and India, notably by fueling inflation and curbing the influx of tourists , according to a World Bank report last month.

The $3 billion economy has contracted for two years – by 3.7% in the 2020/21 financial year ending July and by 2.4% the year before – pushing more people into the poverty.

Those at the poverty line, measured at $3.20 earned daily per person – rose to 12.6% of the total population in 2021 from 11% in 2019, the report said, noting that the economy is expected to grow by 4, 4% in the current fiscal year, with downside risks.

“About 29% of households are still worried about running out of food. Of these, almost half have reduced their food consumption as a precautionary measure,” the report said, adding that people in rural areas were more likely to eat less. meals or skip them.

Bhutan’s inflation is expected to remain in line with India’s, which hit an eight-year high of 7.8% in April, given its Ngultrum currency’s peg to the Indian rupee and its dependence on against imports, the International Monetary Fund said on Tuesday after its annual review of the economy.

Retail price inflation could remain elevated after rising 8.2% in the previous year 2020/21, he said, driven by food prices.

The government raised retail gasoline and diesel prices last week for the second time in a fortnight, worried about the impact of rising oil imports – hitting 8.35 billion Bhutanese ngultrum (107. $63 million) in 2021.

Sharma said the country’s economic fundamentals were strong and it had adequate foreign exchange reserves of around $1.4 billion – enough for around 12 months of imports.

($1 = 77.5782 ngultrums)

(Writing by Manoj Kumar; Editing by Bernadette Baum)