Finance Minister affirms that health of economy is sound

The minister says he sees no problem in national debt repayment

The health of the country’s economy is fairly well compared to other countries despite the COVID-19, according to Finance Minister Namgay Tshering.

During the meet the press session on Friday, Lyonpo mentioned that Bhutan has not crossed the critical crisis.

As per the International Monetary Fund (IMF) report of September, globally, there is an economic slowdown by -4.5% GDP in average. In India, the GDP per se has dropped to almost -12%.

Lyonpo said: “Compared to other countries in the world we are doing fairly well because the scale of our economy is quite small. Some portion of the local economy is still working.”

“It is neither in the recovery track, nor are we at recession,” said Lyonpo.

Additionally, to manage the capital and recurrent budget, the government has initiated major reforms in the budgetary system. The domestic revenue has gone done by almost 14% as compared to the absolute expenditure made in the previous financial year.

“We have to tune our recurrent expenditure with available and forecasted domestic revenue,” Lyonpo said, adding that they would not compromise on the mandatory expenses.

Mandatory expenses include salary, allowances, maintenance and operation costs. Budgetary offices get recurrent budget as an annual block grant.

“It is not that the government does not have money; it is how we can optimize the prudential use of public resources,” said Lyonpo.

Lyonpo said 31% of the capital budget for the 12th FYP outlay will be mobilized in this fiscal year with the hope that the country will recover the GDP loss.

“In the first six months of the pandemic, we have estimated a GDP loss somewhere in between Nu 4bn to Nu 5bn,” Lyonpo said.

Lyonpo also mentioned that the capital budget utilization as of September is 6.2% of the total budget outlay. This is the absolute amount made in payment. “There is some amount not accounted due to incomplete work.”

He added that as in previous years, in the first quarter of the year, only about 5% of the total budget outlay is utilized due to the tendering process.

Fiscal deficit

The fiscal deficit in absolute figure had increased to Nu 15.33bn from the original estimates of Nu 15.32bn due to the incorporation of loan funded activities in the fiscal year.

Lyonpo said that usually the capital deficit will be high in the beginning of the year but as the financial year draws to an end, most of the time there is no deficit because there is fiscal surplus. “There is surplus because activities are not implemented.”

“The Nu 13bn deficit will be managed from domestic source and the remaining from concessional borrowings. In terms of revenue performance, despite the hurdle we could realize almost 38% of the projected domestic revenue that we have forecasted as of November this year,” said Lyonpo. “We should not worry about deficit if we really want to bring economic recovery, we should worry about surplus,” he said.

Lyonpo said that they hope to boost the domestic revenue through direct and indirect taxes. “Though there was deferment of tax payment, from now onwards it will be decided on case-wise basis.”

Prime Minister Dr Lotay Tshering said that in the 12th FYP, the government decided to allocate about 16% of the total budget outlay in the first year, 22% in the second year, 24% which is the highest so far in the third year, 20% in the fourth year and it will drop to 16% in the final year.

“In the initial year we decided to allocate less portion of the total outlay, in the mid-plan we decided to allocate the highest portion of the total outlay and in the end year plan we decided to allocate the lowest portion of the budget outlay,” said Lyonchhen. “If it was a political motive, the highest portion of the total outlay would be allocated in the plan end. But it is wasteful expenditure.”

Lyonchhen also mentioned that frontloading of donor funds means it is frontloading of the activities.


The total public debt increased by Nu 7.92bn in a three-month period in July,   August and September. The total public debt stood at Nu 223.29bn as of September 30, according to the public debt situation quarter report as of September end. The total public debt accounted for 120.8% as of Financial Year 2020/21 GDP.

The hydropower debt constitutes the major portion of the total external debt which is 75.1%, followed by policy and budget support 10.9% and central bank debt 3.3%. In terms of absolute figure hydropower debt stands at around Nu 180bn.

The finance minister said that a major portion of the debt is hydro-power debt. “Here debt increases because we continue to get loans for ongoing projects, Puna I and II despite the work progress. But hydro-debt is self-liquidating.” The Lyonpo said that as per the public finance policy, non-hydro debt must be contained below 35% of GDP. As of now non-hydro debt stands at 22% to 25% of the GDP.

In the non-hydro debt, a major dent is concessional borrowings from the World Bank and the Asian Development Bank (ADB). Lyonpo said that the government is not paying interest rate except 0.75% as a service fee to the World Bank and that the debt repayment time frame is 32 years.

ADB debt repayment time frame is 25 years.

Lyonpo said that the interest rate of ADB is 1% during the grace period and 1.5% after the grace period. This is highly concessional.

“At this time, we have to borrow from the ADB and World Bank because in 2018 and 2019 the tourism receipt alone contributed US$ 86mn to the government and there is a need to offset since we don’t have tourism in the country right now,” said Lyonpo.

Lyonpo clarified that concessional borrowings will help to build the convertible currency reserve and secondly when the dollar appreciates against Ngultrum, during such crisis “we are gaining. Moreover our repayment time is longer.”

“We have done a thorough analysis and we could contain public debt.”

Lyonpo also mentioned that with support of International Monterey Fund the country got offer from multi-lateral financial institutions like the ADB and World Bank on deferring the national debt repayment. “But we don’t want to do that and spoil our reputation.”

“We don’t see any problem in debt repayment,” concluded Lyonpo.

Dechen Dolker from Thimphu