The country’s total public debt has increased by almost Nu 7bn in the fourth quarter of last year as compared to the preceding quarter. According to the finance ministry’s quarterly Public Debt Situation Report, the total public debt stands at almost Nu 280bn as of 31st December. The majority of the total debt, which is 90 per cent constitutes external debt.
Total public debt is the amount of money that the government has to pay back to creditors, which can include individuals, businesses, and other countries. It includes all forms of borrowing, such as bonds and loans that the government has taken on to finance its operations and projects.
The increase in the total debt was due to growth in both external and domestic debt. External debt increased by Nu 4.9bn, while domestic debt increased by Nu 2bn to a little over Nu 28bn.
The total external debt of Nu 251.8bn, includes government debt of Nu 228bn, borrowings made by public corporations of Nu 12.8bn, and central bank debt of Nu 10bn.
According to the report, the figures for government debt include borrowings for budgetary activities, hydropower projects, and other loans.
While the hydropower debt of Nu 167bn saw a slight decrease from the preceding third quarter, borrowings of Nu 3bn by the central bank primarily contributed to the increase in external debt.
The majority of the external debt is owed to the Government of India. The Indian rupee-denominated debt stands at Nu 161.8bn, which is 64.3 per cent of the external debt.
The rest of the external debt is owed in convertible currency, which is a little over a billion US dollars.
The Asian Development Bank and the World Bank’s International Development are the country’s largest convertible currency creditors at 16 per cent and 15 per cent respectively as of the end of last year.
As for debt repayment, the report estimates almost Nu 15bn of principal amount and interest will be paid in the 2023-2024 financial year.
As for the domestic Nu 28.1bn, over Nu 22bn are government bonds, which have a maturity between three to 12 years. The remaining Nu 6bn is treasury bills.
According to the report, despite the elevated levels of total public debt, the overall-debt risk is deemed manageable since a significant portion of external debt is for hydropower projects.
The current debt-to-GDP ratio is at 103.2 per cent.
Sherub Dorji
