The debt fear is real but it should not be exaggerated and be used for political mileage, the Prime Minister said in response to Druk Nyamrup Tshogpa’s (DNT) statement of May 19.

In its second press release issued in response to the explanation the Prime Minister provided on May 12, DNT stated that the Prime Minister was trivialising the issue and misleading the people by misrepresenting International Monetary Fund’s (IMF) assessment of Bhutan’s debt risk as “just moderate” and “definitely not high.”

According to DNT, debt fear is real because the national debt per capita is USD 2,993 per citizen, which is almost Nu 200,000 per Bhutanese. The party insists that the PM’s statements of “definitely not high” and “just moderate” are factually not true.

“The truth is, debt fear is real and it is a high risk by all indicative international thresholds at the macroeconomic level when we talk about the country’s economy as a whole,” its press release stated. “We are talking about macro-economy of Bhutan, not micro-economy or a sector of economy such as hydropower.”


The IMF’s debt sustainability analysis, which is available online, states that Bhutan’s rapid hydropower development has led to a substantial buildup of external debt, and that as a consequence, external debt ratios breach all indicative thresholds.

However, the analysis states that based on unique mitigating circumstances, such as the large share of external debt being linked to hydropower project loans, the IMF continues to assess Bhutan’s external risk as moderate.  “As a result, Bhutan’s debt situation is expected to improve in the medium and long term, reflecting significantly higher electricity exports when hydropower projects come on stream,” the analysis states.

According to the budget report, 2017-18, Bhutan has to pay Nu 4.9 billion (B) in the upcoming fiscal year to service debt for both hydropower and non-hydropower loans. Of the Nu 4.9B, Bhutan has to pay Nu 2.82 B on principle and Nu 2.08 on interest repayments. Hydropower loans consist of 47.6 percent of principal amount and 59 percent of interest repayments. Debt service ratio to export earning for the same fiscal year is 23.5 percent, the budget report states.

DNT states that debt to GDP ratio has increased from 93.64 percent in 2013 to 112.87 percent in 2017. “Data trends show that the current Government has not done well with debt management and has put the country at more risk,” it states.

The Prime Minister said that the rising public debt is a challenge. “That’s why I am not going to trivialize it,” he said. “I have always said that whether hydropower or not, debt is debt and we have to realise that. Now the question is are we managing the challenge or ignoring it.”

He said the focus is on hydropower debt because 72.5 percent of the debt, or three fourth of the debt is hydropower debt. The prime minister also said that the public debt policy clearly outlines how much debt the government could accrue. “We did it because we want to be responsible ourselves and we are ensuring that the future governments are responsible,” he said.

The IMF analysis also states that since India provides explicit guarantees that cover financial and construction risks for the intra-governmental hydropower projects, hydropower loans are more akin to foreign direct investment rather than debt creating loans.

The prime minister also questioned the intent of DNT choosing to list the debt to GDP ratio until 2017 and not until 2022 as reflected in the report.  According to the IMF report, debt to GDP ratio declines to 106.070 percent in 2018, 94.852 percent in 2019 and reaches 70.137 percent in 2022.

“Two things happen to why it’s declining – one is PHPA-I, II and Mangdechhu will be complete and when it starts generating electricity, we start paying off the debt,” he said. “The other reason it is coming down is that our GDP is growing and so as a percentage of GDP, it will fall.”

The Prime Minister said it is unfortunate that DNT stated that it would not analyse deeper. “If they are as concerned as they claim, they should analyse deeper and engage meaningfully with the government,” he said. “We are talking about nation building and about DNT having the opportunity to establish that they are capable of government. But unfortunately they are showing their inability to understand national priorities and to understand the fundamentals of the economy.”

Sonam Pelden