The overarching objective of Bhutan’s Tenth Five-Year Plan (10FYP)—which is also the Royal Government of Bhutan’s Poverty Reduction Strategy Paper (PRSP)—is to sustain this trajectory and reduce poverty further. Political stability, prudent economic management, and development of the hydropower sector delivered robust economic growth during the 9FYP. Favorable economic performance was underpinned by sound macroeconomic policies. The 10FYP forecasts an average fiscal deficit of about 3 percent of GDP, the same as in the 9FYP and in line with the Royal Government of Bhutan (RGoB)'s strategic fiscal policy goals.

This paper discusses Bhutan's Poverty Reduction Strategy Paper (PRSP). The Royal Government of Bhutan has initiated the PRSP process as part of broader ongoing efforts to combat poverty. The main objective of the PRSP process is to strengthen the strategic framework for poverty reduction, improve donor coordination, and build support for new initiatives in public expenditure management and poverty monitoring and evaluation. The envisaged process builds directly on the Ninth Five-Year Plan (Ninth Plan).

This Joint Staff Advisory Note focuses on the Poverty Reduction Strategy Paper (PRSP) Progress Report for Bhutan. Bhutan’s PRSP aims to galvanize the poverty reduction efforts of the Royal Government of Bhutan, building on past achievements. It targets an average growth rate of 8¼ percent during 2004/05–2006/07, which is about 1¾ percentage points above that experienced during the Eighth Plan and the first two years of the Ninth Plan. Pushing the economy to this higher growth trajectory will be a challenge; however, some increase in the growth rate can be expected over the medium term.