June 18, 2026
THIMPHU – The country’s economy is on a growth trajectory, buoyed by rising revenues, strong remittance inflows and improved public finances. Yet the country faces two major threats that could undermine long-term growth: outmigration of young Bhutanese and vulnerability to global fuel price shocks.
Presenting the State of the Nation Report 2026 to Parliament yesterday, Prime Minister Tshering Tobgay described outmigration as the country’s most serious national challenge, warning that the departure of thousands of young and skilled Bhutanese represented an existential risk.
More than 71,000 Bhutanese, equivalent to about 10 percent of the population, are currently living and working abroad, most of them young, educated, and skilled.
“The economy will not develop on its own, and certainly not with a few experts coming in to help us,” Lyonchhen said. “The responsibility of developing our economy rests solely and fully with us.”
Lyonchhen acknowledged that many Bhutanese who return bring valuable skills, experience, and international exposure that can contribute to national development. In 2025 alone, inward remittances reached USD 342.94 million, providing significant support to households and the broader economy. At the same time, rising global fuel prices linked to the conflict in West Asia have added pressure on the economy. The disruption of international supply chains has triggered fuel shortages and price volatility across several countries, including Bhutan.
Lyonchhen said Bhutan has continued to receive petroleum products, including LPG, petrol, diesel, and aviation fuel, without interruption through the support of the Government of India. “Furthermore, His Majesty’s fuel price Kidu support has greatly benefited all citizens.”
To reduce exposure to external energy shocks, the government has adopted a National Energy Security Strategy aimed at reducing dependence on imported fossil fuels and accelerating the transition to domestically generated electricity.
“It aims to reduce fuel consumption and replace it, as far as possible, with domestically generated electricity. This will help our economy and drive our vision of economic self-reliance,” Lyonchhen said.
Financing position improves
The State of the Nation report highlighted significant improvements in the financing position of the 13th Plan, which has a total outlay of Nu 512 billion. A projected financing gap of Nu 56 billion has been fully closed, and the government now expects a surplus of about Nu 20 billion.
The turnaround was driven by higher domestic revenues, which increased from Nu 330 billion to Nu 380 billion. Additional support came through Nu 85 billion in grants from the Government of India, Nu 15 billion under the Economic Stimulus Programme, Nu 10 billion from Japan, the European Union, and United Nations agencies, and Nu 25 billion from the Asian Development Bank, the World Bank, and other concessional financing sources.
The government has already completed a review of the 13th Plan ahead of its formal mid-term assessment in December. The exercise sought to align programmes and investments with emerging national priorities, including the Gelephu Mindfulness City (GMC), the Diamond Strategy and the 21st Century Economic Roadmap.
“Since the financing position of the 13th Plan is now sound, there is an opportunity to review and refine its programmes and activities,” Lyonchhen Tshering Tobgay said, adding that during the formulation of the 13th Plan, there was no concrete idea on how to contribute to the fulfilment of GMC.
The plan is organised around eight flagship programmes: economic transformation, 21st-century skilling, education transformation, healthy Drukyul, digital transformation, transformational governance, socio-cultural resilience and community vitality, and ecological diversity and resilience.
According to Lyonchhen, the 21st Century Economic Roadmap remains central to the government’s ambition of expanding the economy tenfold by the end of the decade.
The government is focusing on infrastructure, regulatory reforms, foreign direct investment, and trade facilitation as key growth enablers.
Growth across key sectors
Bhutan’s gross domestic product (GDP) increased from Nu 280 billion to Nu 364 billion, an increase of 30 percent, driven by energy, agriculture, tourism, mining, manufacturing, cottage and small industries, and initiatives under the 21st Century Economic Roadmap.
Energy capacity increased to 3,576 megawatts (MW) from 2,452 MW, supported by Punatsangchhu-II and other hydropower projects.
A target of 25,000 MW by 2040 has been set, with major projects including Kholongchhu, Punatsangchhu-I, Wangchhu, and Dorjilung underway or planned.
Five small hydropower projects – Gamri-I, Druk Bindu, Jomori, Boegana and Lunana – totalling 195.5 MW are being implemented by Druk Green Power Corporation (DGPC). In addition, 11 projects are being developed with TATA Power, Adani Power, Jindal, GMR, and PTC, forming a pipeline of over 6,800 MW.
The DGPC will also develop hydropower projects in Parochhu, Gamri-II, Yurmongchhu, and Sherichhu.
Lyonchhen described the expansion as a transformation of Bhutan’s energy economy and a critical foundation for future growth in technology and digital industries.
Agriculture, which contributes less than 15 percent of GDP but supports roughly 43 percent of the population, received continued investment in fencing, irrigation systems, farm mechanisation and fertiliser supply. The government has also allocated Nu 800 million for crop and livestock insurance.
Tourist arrivals more than doubled, rising from 103,000 in 2023 to 210,000 in 2025. The government’s target is to bring in 300,000 visitors annually.
Meanwhile, cottage and small industries recorded 8,552 new licences and around 8,700 new businesses, supported by Nu 3.3 billion in concessional loans. Mining revenues increased from Nu 4 billion to Nu 5.5 billion, supported by a national mineral exploration project.
Infrastructure and investment
Infrastructure development continued across the country, with four national highways constructed, eight upgraded, 20 gewog centre roads completed, and five bridges built. Nine additional bridges are under construction.
To facilitate the import and export of essential goods, Pasakha and Nganglam dry ports have been completed, while the Gelephu dry port is under construction.
Two domestic airstrips are planned in Samrang, Samdrupjongkhar, and Yoeseltse, Samtse. Detailed project reports for the Gelephu–Kokrajhar railway line in Assam, India, and the Samtse–Banarhat railway line in West Bengal, India, have also been completed.
“To expand internet connectivity, the new Government of Bangladesh has agreed to support the establishment of the third internet gateway, and the government aims to start implementing the works by the end of the year,” Lyonchhen said.
On investment and trade, 35 Foreign Direct Investment projects worth Nu 226 billion have been approved.
Bhutan is working to renew its Free Trade Agreement with India and expand agreements with other partners, including Thailand, Bangladesh, and Vietnam, alongside World Trade Organization accession efforts.
Inclusive growth push
Technical training capacity has expanded from 900 to 3,000 trainees, with more than 55,000 youth trained and around 3,000 employed. About 7,000 have received information technology training.
Education sector transformation received Nu 82 billion, which represents 19 percent of the Plan budget, supporting infrastructure in 34 schools and expanding Early Childhood Care and Development centres to 713, along with strengthened meal and nutrition programmes.
The Cambridge curriculum is being rolled out nationwide, alongside plans for a Science, Technology, Engineering and Mathematics school in Paro.
Around 18,000 teachers have been trained, higher education support has expanded, and a new EtonHouse-linked school will open in August.
Drug-free school initiatives are also being enforced, including a support school at Yonphula.
The health sector received Nu 60 billion, 12 percent of the plan outlay, with three hospitals completed and new urban health centres established in Thimphu and Phuentsholing. Trashigang Hospital will be expanded, the Jigme Dorji Wangchuck National Referral Hospital will be upgraded, and a super-specialty hospital will be built.
Around 92 percent of patients are covered by the Electronic Patient Information System, and major communicable diseases have been eliminated. Non-communicable diseases remain a concern, with over 278,000 screened and more than 68,000 diagnosed with hypertension or diabetes.
The government has launched the Third Child Plus Programme to address population decline, with annual births down 26 percent from 11,001 in 2015 to 8,153 in 2024 and fertility below the replacement level of 2.1, while mental health services have been strengthened.
The digital economy has created about 1,230 jobs and generates around Nu 500 million annually, with a target of contributing USD 60 million to GDP and creating 1,000 additional digital jobs.
The National Digital Identity system is operational, with cybersecurity and artificial intelligence strategies being implemented, while a third internet gateway is planned with regional partners.
Transformations include civil service restructuring, with over 700 officials trained under the Entrepreneurial Bureaucracy programme. Digital systems are improving service delivery, and the Annual Performance Agreement system will be reintroduced, Lyonchhen said.
He added that close to 90 policies have been reviewed and 151 regulatory provisions harmonised, and support has been provided to civil society organisations.
Water resource mapping, climate finance initiatives, and natural capital accounting are being introduced. Forest fire damage will be reduced by 25 percent, and degraded forest land will be restored through public-private partnerships.