World Bank Approves $25 Million Package to Boost Jobs and Economic Resilience in Bhutan

The World Bank has approved $25 million in financing to support Bhutan's efforts to create jobs, strengthen its private sector, and build long-term economic resilience, marking a significant step toward the country's goal of achieving high-income status by 2034.

The funding—under the First Growth and Jobs Development Policy Financing—will help Bhutan implement wide-ranging reforms aimed at stimulating private sector-led growth, improving job quality, and modernising key economic systems.

Addressing a Critical Jobs Gap

Despite steady economic growth and notable poverty reduction, Bhutan faces a structural challenge: job creation has not kept pace with workforce needs, particularly for young people.

Key labour market pressures include:

• Over 40% of workers employed in low-productivity agriculture

• Heavy reliance on public sector jobs for stable employment

• Youth unemployment rates nearly five times higher than the national average

• Rising migration of skilled and educated youth seeking better opportunities abroad

Finance Minister Lyonpo Lekey Dorji said the programme is aligned with Bhutan's 13th Five-Year Plan, focusing on creating quality jobs for youth, women, and vulnerable groups.

Driving Private Sector Growth

A major focus of the financing is to unlock private sector potential, which is seen as essential for sustainable job creation.

Key reforms include:

• Expanding access to finance through updated external borrowing rules, allowing Bhutanese firms to tap into international capital

• Strengthening the foreign direct investment (FDI) framework to attract global investors

• Supporting business entry and expansion to increase competition and productivity

World Bank officials say these measures will help shift Bhutan's economy from public sector dependence toward a more dynamic, investment-driven model.

Tax and Fiscal Reforms to Spur Growth

The programme also includes significant reforms to Bhutan's fiscal framework:

• Modernising the tax system to simplify processes

• Reducing the corporate tax burden to encourage business growth

• Lowering compliance costs to support formalisation of enterprises

• Strengthening debt management and public investment systems

These changes are designed to create a more business-friendly environment while improving domestic revenue mobilisation.

Transforming Agriculture and Rural Livelihoods

Given the large share of the population in agriculture, the programme places strong emphasis on sector modernisation:

• Strengthening farmer cooperatives

• Improving the targeting of agricultural subsidies

• Enhancing efficiency of state-owned agricultural enterprises

• Promoting commercialisation and value addition

The goal is to move farmers from subsistence-based activities toward higher-income, market-oriented production.

Strengthening Worker Protection and Inclusion

The financing also targets labour market reforms to improve job quality and inclusivity:

• Enhancing the sustainability of the pension system

• Encouraging greater private sector participation in employment

• Improving working conditions for women, youth, and vulnerable groups

These measures aim to ensure that economic growth translates into inclusive and equitable opportunities.

Financing Structure: Grant and Concessional Support

The $25 million package is structured to minimise fiscal pressure:

• $12.5 million as a grant

• $12.5 million as concessional financing

  • 40-year repayment period

  • 10-year grace period

This is the first of three planned operations, indicating sustained World Bank support for Bhutan's reform agenda.

A Strategic Push Toward 2034

World Bank Country Manager Xavier Furtado noted that while Bhutan has achieved strong growth, the next phase of development requires higher-quality, better-paying jobs.

"This programme supports the reforms needed to stimulate investment and improve job quality," he said.

What This Means

The initiative represents a comprehensive economic reform package, targeting:

• Job creation and labour market transformation

• Private sector expansion

• Fiscal and institutional strengthening

• Inclusive growth

If successfully implemented, the reforms could help Bhutan transition toward a more diversified, resilient, and high-income economy within the next decade.