As of the end of last year, Bhutan’s total public debt was almost Nu 265bn, according to the finance ministry’s Public Debt Situation Report. Of the total debt, almost Nu 238bn is external debt, which the report states is of moderate risk as a significant portion of it is for hydropower projects.
The total public debt saw an increase of almost Nu 8bn in the last quarter of 2022. The overall risk of the total public debt, which is 129 per cent of the gross domestic product, is deemed manageable according to the report.
A major chunk of the total external debt is on hydropower projects at Nu 164bn. According to the report, the hydro debt comprises the debt stock of six hydropower projects of Mangduechhu, Punatsangchhu I and II, Nikachhu, Dagachhu, and the upper and lower stages of Basochhu.
The report states, “hydropower debt is considered low risk as debt servicing for hydropower loans from India starts only a year after the commissioning of the projects, ensuring revenue inflow before debt servicing starts.”
The remaining external debt of Nu 73.2bn is non-hydro debt owed to international organisations like the Asian Development Bank, International Development Association, and the Japan International Cooperation Agency (JICA).
The report states that non-hydro debt stock is within the threshold of 35 per cent of GDP set by the Public Debt Policy of 2016, during a five-year plan period. The current non-hydro ratio to GDP stands at 31.4 per cent.
In the domestic debt front, most of the Nu 27.9bn debt is budgetary debt from selling government bonds and treasury bills. As of the end of last year, the government raised Nu 15bn and Nu 12.2bn from selling treasury bills and government bonds respectively.
Domestic debt saw a slight decrease of Nu 361 M at the end of the last year.
However, with the Royal Monetary Authority offering treasury bills worth Nu 10bn recently, and a further Nu 1.25bn worth of government bonds auctioned in January, the domestic debt stock is expected to considerably increase during the first quarter of this year.
Sherub Dorji
