Bhutan now has a Public Debt Policy. The finance ministry launched the new policy yesterday. It is to guide the country’s investment, ensure that financing decisions are prudent and public debt is maintained at a sustainable level.
The public debt policy is to set a debt ceiling of country’s external borrowings. It is also to manage outflow of rupee and for better management of funds for hydropower projects.
The finance minister, Namgay Dorji said they have segregated debt into two parts; hydro and the non-hydro debts.
Under the non-hydro, the debt policy clearly defines Bhutan cannot borrow over 35 percent of the Gross Domestic Product within a particular year.
Lyonpo also said hydropower loans cannot exceed 40 percent of the revenue generated from the sale of hydropower.
According to the National Budget Report of 2016-17, the estimated hydropower loan is slightly over Nu 130 B. It is projected to reach nearly Nu 158 B by the end 2019.
The policy also said total external debt should not cross 25 percent of the total exports of goods and services.
The external debt stands at Nu 155 B as of June, this year.
The Cabinet formally approved the policy a month ago.
“In future, political parties will also come up with all sorts of pledges, so unless we have a debt policy, the overall debt in the country will have lot of high risks,” said Lyonpo Namgay Dorji.
By 2020 Bhutan will be migrating from low income country to middle income country. “We will not be getting grants as what we do now.”
Lyonpo said Public Debt Policy aid the government not to incur exorbitant debts.
