The government is caught between the devil and deep blue sea, or as we say, it is a jogtang (potato) between two rocks when it comes to the mounting debt situation. 

Total government debt has reached Nu 238,398 million, which is 129 percent of the Gross Domestic Product. This is a cause of concern not only for the government, but for every Bhutanese, as per capita debt increases to Nu 315,288. 

Debt is spiraling out of control, but the government has to borrow. Both the Prime Minister and the Finance Minister recently told a local weekly, The Bhutanese, that the government will not only borrow, but borrow big to help revive the economy.  To revive the economy, the government needs to inject money. Economic growth is in the negative. Without money in the government coffers, the government has to fund activities through borrowing from within or from outside. It will add to the debt burden.

Increasing debt, whether internal or external, should be a cause for concern. We could blame the pandemic that forced the economy to a standstill. The biggest contributors to the GDP like the construction and manufacturing sectors, tourism, and service sectors have been the hardest hit sectors. If we are convinced that GDP is not the correct yardstick to measure growth, we need not be concerned. Growth will be spurred if we open our borders to tourism, let foreign workers come in, and revive the construction and manufacturing sectors. Government expenditure, which the pandemic has restricted, contributes substantially to the GDP. 

Going through the details, what we should be more concerned about is the increasing recurrent expenditure, even as the source of internal revenue is affected. In the last fiscal year, total recurrent expenditure was 88.94 percent of the total internal revenue. It has fulfilled the constitutional requirement of internal revenue meeting current expenditures, but we should not take comfort in this.

Domestic revenue has been increasing over the years, even during a pandemic year. However, apart from meeting current expenditures, there is waste of public funds. Millions of Ngultrums are wasted every year. Even as the government discusses borrowing, there is a Royal Audit Report that has pointed out wastage of public resources through several means. 

Millions of Ngultrums are wasted through fraud and corruption, misappropriation due to lapses and loopholes, or not following rules. The details of the audit report will be made public soon, but we can surmise that the scarce resources are misappropriated, misused because of inadequacies in our control and monitoring systems, or lack of integrity. Issues in procurement procedures, excess payments, inadmissible payments, fictitious payments, and lack of integrity or not shouldering responsibilities are always the leading causes of wastage of scarce resources.

While successive governments had been saying that hydro debts are self-liquidating, it still remains a concern, not only because of the delay in commissioning hydro projects, but the increasing financial irregularities in the hydropower sector.  

Hydro debts today amount to 73.40 percent of the total external debt. Irregularities because of failure to comply with financial norms, laws and regulations, uneconomical operations, and many more lapses are leading to losses in the billions. It will add to the debt burden.