Proposed Loan, Grant, and Technical Assistance Grant Kingdom of Bhutan

Bhutan is steadily urbanizing. The share of the urban population increased from 30% in 2005 to 42% in 2021, driven by an average annual growth rate of 1.9% over that period. The urbanization rate is projected to reach 56.8% by 2047.2 Urban population growth is fueled by rural migration, mostly to the four largest urban centers of Gelephu, Phuentsholing, Samdrup Jongkhar, and Thimphu, which account for 59.0% of the total urban population. While 58.0% of the Bhutanese population still lives in rural areas and engages in small-scale and subsistence agriculture, the constant flow of rural migration to urban centers is exerting mounting pressure on urban services. Bhutan has a chance to be proactive and focus on housing development. Economic growth in the capital city, Thimphu, has been fueled by expansion in construction, services, and manufacturing. Bhutan has a current overall unemployment rate of 2.4%, which is low relative to neighboring South Asia countries. The Government of Bhutan’s Twelfth Five Year Plan, 2018–2023 calls for developing the economy by fostering growth in the private sector, which will create jobs and contribute to sustainable poverty reduction and the country’s transition to green and resilient development.