MB Subba

The issuance of the first-ever sovereign or government bond worth Nu 3 billion (B) with a three-year maturity period has been well-received and fully subscribed.

The bond has been allotted. The Royal Monetary Authority (RMA) on behalf of the government had offered the bond for subscription from September 7 to 22 at the annual coupon (interest) rate of 6.5 percent.

A total of seven institutions and 48 individuals subscribed. Financial and non-financial institutions including pension, insurance companies and CSOs participated.

The finance ministry will pay the coupon on a half yearly basis. The maturity date is September 26, 2023, on which the principal amount and final interest will be paid.

The issuance of the bond is aimed at supporting the economy to recover from the pandemic while diversifying financial sources.

Finance Minister Namgay Tshering said that the capital will not only be mobilised for Covid-19 purposes but also to bridge the financial gap.

“Our annual budget normally comes with a budgetary gap and issuance of the bond is one of the means of meeting the resource gap,” he said. The issuance of the bond, he said, also would help circulation of money in the economy.

The finance ministry has described the issuance of the first-ever government bond for public subscription as a historical move and that it had significantly expanded the government’s fiscal management space.

The new financing instrument, which was supported by the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), is a monumental step in tapping into the domestic resources market and preparing Bhutan to enter the international capital market, a press release posted on ESCAP’s website states.

The ESCAP provided its assistance in the form of research studies, training workshops and study tours.

United Nations Resident Coordinator in Bhutan, Gerald Daly, has congratulated Bhutan on the successful completion of the offering of the bond despite the small economy, according to the press release.

“The UN system stands ready to further support Bhutan in its efforts to mobilize financial resources and build resilience during the Covid-19 pandemic and beyond,” she said.

The plan to issue the sovereign bond began years ago. But the Covid-19 pandemic has provided impetus for the government to take much-needed measures to support the economy.

The ESCAP states that the innovative project serves as an example of how Least Developed Countries with underdeveloped financial infrastructure could issue sovereign bonds as a tool for economic recovery and capital market development.

“The bond issuance is a major step to independently finance Bhutan’s fiscal needs as the country normally relied on overseas development assistance (ODA) and concessional loans.”