…to surge by 19 percent in 2024-25 FY

Thukten Zangpo

Bhutan’s national debt is expected to surge by 10.5 percent because of financing the fiscal gap and hydropower loans in this fiscal year, the finance ministry projects.

The estimated debt for this fiscal year, 2023-24, is at Nu 306.12 billion, compared with previous fiscal year’s debt of Nu 276.98 billion. In terms of the debt to gross domestic product (GDP) ratio, it is expected to slightly decline to 114.7 percent of GDP from 115 percent in the same period.

Comparing this fiscal year’s debt with last December’s debt of Nu 279.93 billion (103.2 percent of the GDP), it had risen by 9.36 percent.

The finance ministry says that the domestic debt will increase to Nu 33.78 billion to bridge the financing gap estimated at Nu 985.9 million in this fiscal year from the previous year.

At the same time, an additional Nu 28.17 billion on account for disbursements for Punatsangchhu I and II, small hydropower projects, and external budgetary borrowings will surge the external debt, estimated at Nu 272.35 billion.

Hydro-debt is estimated to grow to Nu 172.34 billion from Nu 168.65 billion. Non-hydro debt is expected to increase to Nu 99.97 billion from Nu 75.54 billion in the same period.

For the next fiscal year 2024-25, the national debt is expected to increase by 19.15 percent to Nu 330 billion. However, its debt-to-GDP ratio will see a decline to 110.2 percent.

The domestic debt is projected to rise to Nu 37.97 billion, an increase of Nu 4.19 billion compared to this fiscal year. Similarly, the external debt is projected to increase to Nu 292.04 billion from Nu 272.35 billion.

Hydro-debt would further rise to Nu 180.08 billion, up by Nu 7.7 billion and non-hydro debt will climb to Nu 111.96 billion in fiscal year 2024-25.

According to the Public Debt Management Policy 2023, one of the central government debt thresholds is that the total annual debt service (through budget) should not exceed 35 percent of the total annual revenue.

For hydro debt, the debt service coverage ratio for hydropower debt shall be above 1.2 percent in any given year, and the ratio of the hydropower debt service to hydropower export revenue should be maintained within 50 percent.