With plans to construct more projects 

Thukten Zangpo  

With plans to construct more hydro projects in the coming years, especially small hydro projects, the country’s hydro debt is expected to rise. 

The government has allocated Nu 310 billion for the hydro and renewable energy which falls outside the 13th Plan budget outlay of Nu 512 billion. 

The country’s hydro debt has been growing over the years. However, its share of gross domestic product (GDP) has been decreasing. 

As of March, this year, the hydro debt was reported at Nu 167.5 billion which constituted 64.1 percent of total external debt and 62.8 percent of the GDP estimate. 

These hydro debts were for six hydropower projects—Mangdechhu, Punatsangchhu-I, Punatsangchhu-II, Nikachhu, Dagachhu, and Basochhu. 

The hydro debt in March 2021, at Nu 160.04 billion, has increased to Nu 162.2 billion in March 2022, and to Nu 167.74 billion in March 2023. 

The hydro debt in March last year was equivalent to 82.8 percent of GDP and 69.6 percent of total external debt.

Finance Minister Lekey Dorji, recently said that Bhutan with the natural advantage of developing hydropower plants will pursue developing hydropower plants. 

Hydropower plants with complete detailed project reports need to start as soon as possible and the government is working on projects such as Kholongchhu, Chamkharchhu, while the finance ministry is developing the financing modality, he added.

Lekey Dorji said that the government is also diversifying the energy mix with developing many small hydro projects, wind, and solar including geothermal energy. 

The government has started construction of small hydro projects with the total capacity of 365 megawatts (MW) in Suchhu, Yungichhu, Burgangchhu, Jomori, Gamri-I, Bindu I and II, Begana, and pumped storage project (1,800MW) in Gongri- Jerichhu. 

In the 13th Plan, the government aims to install 500MW of solar and 23MW of wind energy. 

“The government does not take indiscriminate hydro loans, most are concessional loans with interest less than 1 percent and longer duration of loan repayment up to 40 years,” the minister said, adding that the hydro loans are self-liquidating. 

He added that the government made the Public Debt Policy in 2016, reviewed later in 2023 to regulate and manage the country’s debt. 

According to the Public Debt Management Policy 2023, the non-hydro debt should not exceed 55 percent of GDP annually. 

The non-hydro debt stood at Nu 93.62 billion, constituting 35.9 percent of total external debt and 35.1 percent of estimated GDP as of March this year. 

In the 13th Plan, the government has set an ambitious goal of doubling the GDP to USD 5 billion by 2029. 

“As the GDP grows, the government has more fiscal space to borrow and it can create more public spending which leads to further growth in GDP,” the finance minister said. However, ensuring most of the resources must go to the productive sector. 

National debt was reported at Nu 293.09 billion as of March this year equivalent to 109.8 percent of GDP. External debt was Nu 261.12 billion and domestic debt at Nu 39.97 billion.