In recent days, rising fuel import costs and global grain shortages have resulted in a spike in domestic prices, posing a risk of food scarcity for people in Bhutan, especially in rural areas, economic affairs minister Loknath Sharma told Reuters on Thursday.
Bhutan, with a population of less than 800,000, is facing the impact of Ukraine war - which has caused a spike in global crude oil and grain prices after its economy began to recover due to the ease of the pandemic restrictions.
Sharma told Reuters that the government was worried about the impact of the export restrictions on grains by some countries, although he did not name them.
In 2021, Bhutan, which depends on imports to meet food demand, imported cereals amount to $30.35 million, mainly rice and wheat from India.
Local industry leaders said recent restrictions imposed by India on wheat exports have sparked concerns of a rise in local prices, though New Delhi has said it will continue exports to vulnerable and neighbouring countries.
Sangay Dorji, secretary-general of Bhutan Chambers of Commerce and Industry, said that higher food prices would hurt the local economy: We are deeply concerned about food supplies. This will worsen the situation after fuel inflation. Economic growth in Bhutan has been hurt by stoking inflation and curbing the inflow of tourists, according to a report from the World Bank last month, due to a strict zero-COVID policy and vaccination of over 90% of the population.
The economy contracted for three years -- by 3.7% in the fiscal year 2020 21 and by 2.4% in the previous year -- pushing more people into poverty.
The report said that the economy is expected to grow 4.4% in the current fiscal year, with downside risks, as well as at $3.20 earned daily per person at the poverty level.
More than 29% of households are worried about running out of food. The report said that almost half of these curtailed food consumption as a precautionary measure, and that those in rural areas were more likely to eat fewer meals or skip them.
The International Monetary Fund said on Tuesday after its annual review of the economy, Bhutan's inflation was projected to stay the same as that of India, which rose to an eight-year high of 7.8% in April.
It said retail inflation could remain elevated after a rise in the previous 2020 21 year by 8.2%, as a result of food prices.
The government hiked retail petrol and diesel prices for the second time in a row, worried about the impact of rising oil imports - touching 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 about $1.4 billion - enough for about 12 months of imports.