The country’s outstanding external debt as of March this year stands at USD 2.67B, about Nu 187B, according to the figures from the Royal Monetary Authority (RMA).

Consequently, the debt to GDP ratio is 115 percent, meaning that the debt size of the country exceeds the size of country’s economy by 115 percent, which is down from 121 percent in March 2017.

Of the total debt, Nu 126B is rupee denominated debt and convertible currency debt constitute USD 693M (about Nu 4.3B), an increase from USD 581M in 2014-15 fiscal year. Between these two periods, the country’s GDP has also grown from Nu 119B to about Nu 150B.

However, when compared with 2013, the convertible currency debt (mostly non-hydro) has dropped by almost USD 1B.

Loans from World Bank and Asian Development Bank alone constitute USD 511M of the convertible currency debt. Hydropower debt has an outstanding loan of Rs 119B, of the total rupee debt of Rs 127.5B. In addition, the Government of India line of credit reflects another Rs 7B in debt.

For the Tala hydropower project, Bhutan has an outstanding loan of Rs 1.3B, which is expected to be cleared by the end of this year. The Punatshangchhu I has a pending loan of Rs 46B, Punatshangchhu II has Rs 39B and Mangdechhu has Rs 32B outstanding.

The Nikachhu project also accumulated a loan of Rs 738M as of March this year.

Addressing the debt issue, especially the non-hydro debt is on the agenda of all political parties. Both the DPT and PDP, who were once in the government, believe that hydro-loans are self-liquidating.

In 2009, the country’s total debt outstanding was Nu 35B, 56 percent of the GDP and of the total debt, 61 percent pertains to hydropower. With the construction of hydropower projects, this ratio has doubled today and still more than 75 perecnt of total debt is due to the hydropower projects.

Words are rife that political parties are already dividing the national debt throughout its populace and giving the impression that people would be made to pay, should the country default.

Financial experts Kuensel talked to say that a country defaulting loan and business defaulting on loans is different. Examples abroad show that countries restructure their debt by either extending the debt’s due date or devaluing their currency to make it more affordable. A rough period is followed, making its exports cheaper and imports expensive.

The credit worthiness of the country also falls and compels it to further borrow more at higher interest. This affects inflation, employment and could lead to series of economic troubles pushing the country to forfeit its assets and resources to its debtors.

As for Bhutan, hydropower debt is always considered commercially viable, but over dependence on single source, market and risk of natural calamities is identified as a risk.

Tshering Dorji