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Bhutan's Monetary Policy Overview: Strategies for Stability and Growth

Explore the Royal Monetary Authority of Bhutan's monetary policy, focusing on conduct, targets, and maintaining of peg. Learn about the importance of effective rupee management and the significance of the peg arrangement with India.

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Bhutan's Monetary Policy Overview: Strategies for Stability and Growth

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  1. Monetary Policy of Bhutan ROYAL MONETARY AUTHORITY OF BHUTAN Research & Statistics Division (Financial Literacy Program) GOPAL GIRI Research Officer March 15, 2010

  2. Outline • Introduction • Conduct of Monetary policy • Conclusion

  3. Introduction 3 • RMA’s functions – Monetary policy • Monetary policy targets

  4. Conduct of monetary policy 4 • Maintaining of Peg • Volume of money & credit – CRR and SLR, RMA Bills, prudential measures

  5. Conduct of Monetary policy (2)

  6. Conduct of Monetary policy (3) 9 December 2009 a. Alignment of domestic interest rate with India • RMA liberalized interest rate in 1997 • Targets- promote investment and market b. Government Treasury Bills • Monetary policy instrument- Establish Repo/Reverse Repo, bench-mark rates • Short term fiscal management tool

  7. Conduct of Monetary policy (4) 9 December 2009 • Need for effective Rupee management in Bhutan -Correct BOP position with India -Monitor inflows and outlows of Rupees -Maintaining proper account for Rupee in circulation • Importance for Bhutan and for all Bhutanese to use Rupee more prudently

  8. Conclusion 9 December 2009 • Limited Independent Monetary policy- close economies ties with India. • Promoting RMA’s defend mechanism to safeguard Peg Arrangement- Indian Rupee management • Rupee continue to be a legal tender in Bhutan • Current best option for Bhutan to continue with Peg Arrangement

  9. THANK YOU

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