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…constitutes 129.1 percent of GDP

Thukten Zangpo 

The country’s national debt saw an increase by 3.1 percent which is equivalent to Nu 7.84 billion (B) in the last three months from October to December last year.

The total debt increased to Nu 264.83B in December last year, the finance ministry’s report shows. This accounted for 129.1 percent of the country’s gross domestic product (GDP) estimate for fiscal year 2022-23.

The finance ministry stated that the increase in debt was because of 8.2B or 3.6 percent increase in external debt. The external debt was Nu 237.63B as of December last year.

The INR-denominated debt saw an increase by INR 1.06B on account of disbursements forPunatsangchhu-I.

INR-denominated debt accounted for 65.7 percent of the total external debt, of which 95.5 percent was hydropower debt.

The Ngultrum value of convertible currency (CC) debt increased by Nu 7.14B owing to the ongoing project loan disbursement and depreciation of Ngultrum against USD.



The CC debt was recorded at USD 983.84 million (M), equivalent to Nu 81.55B, which accounted for 34.3 percent of the total external debt.

The ministry stated that the external debt service to export ratio might hit 14.3 percent in this fiscal year 2022-23, below the Public Debt Policy 2016’s annual debt service ratio at 25 percent.

The external debt service to export ratio measures how much of the country’s export earnings will be servicing its external debt, exposing vulnerabilities to export shortfall, if any, during the year.

At the same time, the internal or domestic debt saw a decrease by Nu 361.27M or 1.78 percent because of rectification of the Bhutan Hydropower Services Limited loan availed from the National Pension and Provident Fund.

The domestic debt was at Nu 27.2B and it included Nu 15B treasury bill and Nu 12.2B government bonds.

Hydro-debt for six projects—Mangedechhu, Punatsangchhu-I, II, Nikachhu, Dagachhu, and Basochhu was at Nu 164.41B—which constituted 69.2 percent of the total external debt and 80.1 percent the GDP.

Non-hydro debt stood at Nu 73.22B, which is 30.8 percent of the total external debt and 35.7 percent of estimated GDP.



According to the ministry, the non-hydro debt stock is within the threshold because the average non-hydro debt ratio to GDP for the past four years of the current five-year plan is 31.4 percent.

“The Public Debt Policy 2016 requires non-hydro debt to be within 35 percent of the GDP during a five-year plan period.”

Government debt accounted for 91.9 percent or Nu 218.35B of the total external debt. This includes borrowings for budgetary activities, hydropower projects, and loans availed by the government and on-lent to public corporations.

Corporate debt amounting to Nu 12.29B constitute borrowings directly contracted by public corporations which accounts for 5.2 percent of the external debt.

The central bank’s debt on standby credit facility with the Government of India totals 2.9 percent of the external debt.



India remains the largest creditor with 64 percent of the external debt, followed by 17 percent from Asian Development Bank, and 14 percent from International Development Association.

Despite elevated levels of debt, the ministry stated that the overall risk is manageable and external debt distress moderate because 90.7 percent of the hydro-debt is INR with a secured market in India.

The ministry stated that 95.4 percent of the total public debt is at fixed interest rate and that limits the exposure to interest rate variables.

The remaining 30.8 percent of the external debt, denominated in CC debt, is concessional loan with nominal interest rates between 0 and 1.5 percent, long grace periods between 8 and 10 years, and repayment periods up to 40 years.

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