The country’s external debt is expected to fall from 105 percent of GDP in the current fiscal year to 76 percent by the end of 12th Plan, the finance ministry projects.

However, in absolute terms, Bhutan’s external debt would increase from Nu 204B to Nu 215B. This is because the country’s GDP is expected to grow by an average of 6 percent in the 12th Plan. Expansion of GDP base would automatically reduce the debt to GDP ratio, meaning the decline in ratio would not translate into absolute decline in external debt.

Of the total external debt, about 80 percent (Nu 154.8B) pertains to hydropower. The hydropower debt to GDP ratio is also expected to decline from 73 percent of GDP to 60 percent by the end of 12th Plan.

Despite the positive projection on hydro debt to GDP ratio, hydropower debt will still form 80 percent of the country’s external debt at the end of the Plan.

The projections on the GDP growth, did not include the Punatsangchhu II project, which is expected to come on line by 2022, end of the 12th Plan. 

Should this project be commissioned on time, the GDP growth in the last fiscal year is expected to cross seven percent. The current estimate is about 5.7 percent.

This would entail further fall in debt to GDP ratio despite increasing debt in absolute terms.

According to the monthly statistical bulletin of the Royal Monetary Authority, as of September last year, hydropower loan was recorded at Nu 119B. The total outstanding loan for Punatsangchhu I was recorded at Nu 46B and Nu 39B for Punatsangchhu II. Both projects failed to meet the deadlines several times and experienced a cost escalation as high as 100 percent of the initial cost. The Mangdechhu project, which is due for commissioning this month has an outstanding loan of Nu 32B, as of September last year.

However, one of the targets in the 12th Plan is to maintain non-hydro debt below 35 percent of GDP since all three governments have claimed that hydro loans are self-liquidating.

Non-hydro debt is also projected to decline from 25 percent to 16 percent by the end of 12th Plan.

These projections are again based on projected fiscal deficit of Nu 29B in the 12th Plan. The government had earlier announced that the deficit could touch Nu 40B, if it was to implement all its pledges that are outside the Plan.

Tshering Dorji