Prime Minister Tshering Tobgay said that while he is happy that Druk Nyamrup Tshogpa (DNT) is following the country’s economic situation and has raised concern, he is unhappy at the way that the party blamed the government.
Lyonchoen, during the Friday Meet The PM Session yesterday, said that DNT is sensationalising the issue by stating that the economy is on the verge of collapsing and comparing it to the Greek economy.
DNT’s real objective, according to the Prime Minister, is to instil fear in the public so that they gain political mileage since the elections are nearing. “That is unfortunate,” he said. “It’s wrong to instil fear.”
He said that on the merit of the party’s concerns it shows that they don’t have an understanding of the macro economy of Bhutan. “They have no understanding of the economy of Bhutan and the real debt situation.”
According to the budget report finance minister Namgay Dorji presented during the ongoing National Assembly session, the country’s debt is 103 percent of GDP. “On face value, the country should be alarmed but more than 80 percent of the total debt is hydropower debt,” Lyonchoen Tshering Tobgay said. “The debt reflects the money the country borrowed to construct hydropower.”
He said DNT is talking about Mangdechhu, Punatsangchu I and II, Dagachu and left over of Tala where the loans are self-liquidating.
Explaining that self-liquidating basically means that the tariff on the electricity project is determined by the cost of the project, the Prime Minister said lower the cost means lower the tariff. “Because the loans are self-liquidating, we paid off the Chhukha, and Kurichu, loans” he said. “We are almost ready to pay off Tala completely.”
Lyonchoen said that the loans are not bad loans and bad investments. “They are a good investment but because it is debt, we should monitor it carefully.”
He said that DNT should not misrepresent the situation to instill fear in public.
Prime Minister also claimed that 20 percent non-hydro debt includes loans to Bhutan Power Corporation, Bhutan Development Bank Ltd and Bhutan Hydro Power Services Ltd. “This money is going to be paid by these entities, not the government.”
He said that the balance is what the government has to pay. “We cut off all the commercial borrowing from the non-hydro where all the corporations will have to pay back themselves and look at what the government has to pay back with taxpayer money.”
Lyonchoen said that as of March 31 this year, non-hydro debt is Nu 34.5B (billion) and it works out to 21.6 percent of the GDP. “Of the 34.5B, non-hydro commercial debt is equal to Nu 6.02B, which is going to be paid by the corporations,” he said. “The government has to pay the balance of Nu 28.48B from its own revenue.”
He said that World Bank and International Monetary Fund (IMF) did a detailed study on country wise, unlike other indexes on the debt sustainability analysis. “They say Bhutan’s exposure is just moderate. Not medium and definitely not high.”
He said that hydropower is huge and if it is not self-liquidating, World Bank and IMF would be alarmed. “So I am afraid that DNT has exposed their lack of understanding of the economy.”
Prime Minister Tshering Tobgay said that the government was then concerned about the previous government’s debt management. “In those days, along with the rest of the country we were scared because the total debt stock was much higher,” he said. “The non-hydro debt was higher and the government had borrowed billions just to finance the rupee crises and that was dangerous.”
He claimed that the overall debt has decreased in their time.
He also claimed that they had to deal with rupee crises and there was the ban on construction and vehicle loans and foreigner (Indian) accounts were closed. “We could all feel the impact of the rupee crises and the fact that we were borrowing to finance it was a concern. That is quite different from the current issue.”