Bhutan Forecast September: Governance Challenges Ahead
Political Tremor
There was a shock in Bhutan’s politics that is likely to impact governance ahead. For the first time in Bhutan’s democratic history, an opposition member was elected Speaker of the National Assembly. Bhutan Tendrel Party’s [BTP] Tempa Dorji, who represents the Maenbi-Tsaenkhar constituency in Lhuntse, defeated the ruling People’s Democratic Party’s [PDP] candidate, Tandin Wangchuk, in the election. Dorji secured 24 votes against Tandin Wangchuk, who received 23 votes.
The outcome is significant because the National Assembly currently comprises 31 members from the ruling People’s Democratic Party and 16 members from the opposition Bhutan Tendrel Party thus some cross voting was evident. The ruling party candidate, the Health Minister Tandin Wangchuk, was unpopular as it appears amongst his own party and yet was selected as the speaker of the house.
With no party whip issued by the ruling PDP, the opposition candidate apparently preferred by some ruling party MPs won the post. While this will strengthen democratic institutions, promote constructive engagement between the Government and Opposition, a weak ruling party may impact overall governance in the country which has had a history of no incumbent party being re-elected so far.
In the nascent democratic politics in Bhutan this is a sign of turbulence and how it bodes for governance by the PDP government remains to be seen as there is intimate coordination that is anticipated between the Prime Minister and the Speaker of the National Assembly on multiple issues including passage of bills and acts
In a related development, two ministers have also voluntarily resigned from their Cabinet portfolios – Minister for Home Affairs Tshering and Minister for Energy and Natural Resources Gem Tshering. The Prime Minister’s Office stated that interim administrative arrangements for the two ministries will be announced shortly, and recommendations for new ministerial nominations will be submitted for Royal Consideration in accordance with the law.
Overall, Bhutan’s PDP government is institutionally stable, but its internal cohesion has been visibly weakened after the August 2026 Speaker election. The Opposition now holds the Speaker’s chair for the first time in Bhutan’s democratic history, signalling a rare institutional setback for a ruling majority
Prior parliamentary debates showed PDP MPs pushing amendments to allow removal of underperforming ministers—an early sign of dissatisfaction within the ruling party. The government is not at risk of collapse, but its ability to push legislation smoothly has been significantly dented.
International Relations
Bhutan is set to review the threat from glacial lakes overflow after the devastation caused by floods in Nepal. In this context the second Hindu Kush Himalaya Parliamentarians’ Meet in Bhutan brought together over 50 law makers and experts to address the challenges and foster regional cooperation in Thimphu. This follows the inaugural meeting held in Nepal last year, where parliamentarians and experts came together to understand the climate challenges facing each country. The Hindu Kush Himalaya (HKH) region faces shared risks—glacier loss, water insecurity, biodiversity decline, and air pollution—that no single parliament can address alone. The meet’s “Urgent Call for Action” underscored a collective political will to confront transboundary environmental threats and align national laws with shared regional goals. What next however is unclear for now.
Economy
Bhutan’s economic situation appears to be comfortable despite the Ministry of Finance released update for the end of FY 2025–26, trimming Bhutan’s 2026 GDP growth forecast slightly to 6.21% (down from 6.31%). The revision reflects a higher base following 8.52% growth in 2025 and modest delays in small hydropower timelines. Hydropower production surged during the monsoon season, reaching 3,873.45 GWh in the preceding quarter (+7% year-on-year) with peak domestic and export generation expected to hit ~7,638 GWh entering FY 2026–27, propelled by output from Punatsangchhu-II and newer small hydro plants (Burganchhu, Yungichhu). Gross international reserves stood firm at $1.22 billion (covering over 12 months of imports). Fiscal deficit for FY 2025–26 was contained at a tight 0.38% of GDP.
As Gelephu Mindfulness City continues to take shape, attention is turning to the roads that will keep the city moving. A new East-West Highway is set to improve access to the airport while linking key highways and future development zones across Gelephu. From above, the scale of Gelephu’s transformation is becoming visible. Importantly there is a concern after the devastating floods in Nepal with Bhutan’s geography facing similar challenges, even though the level of concentration of population including tourists and power infrastructure is far lower in the northern Himalayan belt.
More than 400 delegates from over 60 countries were in Paro for FAO’s “State of Food Security and Nutrition in the World 2026”, to chart a “conscious” future for global food systems, even as Bhutan’s own agriculture sector, battered by a shrinking workforce, unfunded programmes, and fallow land shows just how far the world, and the host nation itself, has to travel. Gracing the event as chief guest, Prime Minister Tshering Tobgay linked the summit’s call for “conscious” food systems to the everyday economics of Bhutanese farming. “A food system cannot endure if the farmers cannot be supported and livelihoods are made better,” Lyonchhen said
Early clarity on the Sustainable Development Fee beyond August 2027 will facilitate a smooth road map for the crucial tourism sector. Set at 100 dollars three years ago, in 2023, providing a 50 per cent discount for international tourists the fees are valid until August next year. Tour operators and hoteliers are now awaiting the government’s announcement on the fee, beyond the current sunset period. By 2026, the SDF has demonstrated strong fiscal performance: USD 44.8 million collected from 60,629 SDF paying tourists between January–April 2026, a 37.7% increase over the same period in 2024. Growth came from both Indian and non Indian segments, though revenue slightly dipped compared to early 2025 due to shorter visitor stays. The programme effectively funds conservation, public services, and carbon negative commitments, while maintaining crowd free cultural sites.
Criticality and Uncertainty—3 X 3 Matrix
| CRITICALITY | |||
High | Medium | Low | ||
UNERTAINITY | High | ● Governance by the PDP in wake of opposition fielding Speaker. ● Outmigration. | ● Resolution of the Sino-Bhutan border issue | ● Management of Prisoners' Rights |
Medium | ● Falling population and skill gap. ● Major Disaster Management | ● Economic growth- debt management. ● Management of the impact of the Gulf Crisis. | ● Down streaming of democracy and voting commitment. | |
Low | ● Trajectory of Gelephu Mindfulness City [GMC] ● India-Bhutan Relations | ● Mitigation of Impact of Climate Change |
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