As per the fourth quarter Socio-Economic Indicators (SEI) Bhutan Report 2024, released by the National Statistical Bureau (NSB), Bhutan’s foreign reserves increased to USD 700.51 million (M), while the nation’s public debt stood at Nu 293 billion (B) during the same period.
According to the SEI Bhutan report, Bhutan’s total public debt increased from approximately Nu 290 billion in the third quarter (Q3) to Nu 293 billion in the fourth quarter (Q4), marking a rise of Nu 3 billion, or 0.86%. This increase reflects a continued upward trend in the country’s borrowing, driven by both domestic and external loans.
As a result of this rise in public debt, the debt-to-Gross Domestic Product (GDP) ratio climbed from 95.20% in Q3 to 97.12% in Q4. The increase of 1.92 percentage points indicates that debt is growing at a faster pace than the economy. A rising debt-to-GDP ratio can signal increased fiscal pressure, as a larger share of the country’s economic output would be required to meet debt obligations.
The report highlights that such a high debt-to-GDP ratio, approaching 100%, may raise concerns about debt sustainability and the country’s ability to finance its obligations without compromising economic growth. However, it is important to note that a significant portion of Bhutan’s public debt is linked to hydropower projects, which are considered self-liquidating as they are expected to generate revenue over time.
The SEI Bhutan report emphasizes the need for prudent fiscal management, focusing on maintaining a sustainable debt trajectory while ensuring continued investment in critical sectors that drive economic growth.
Hydro debt, which forms a significant portion of external debt, reached about Nu 170 billion, reflecting a 0.59% increase from Q3. The rise in hydro debt corresponds to continued investments in Bhutan’s hydropower sector, which is a cornerstone of the country’s economy and a key source of revenue through electricity exports to India. Despite the increase, hydro debt is often classified as self-liquidating, as future earnings from power exports are expected to offset these liabilities.
Meanwhile, domestic debt remained stable at approximately Nu 24 billion, indicating no significant changes in internal borrowing. The government’s steady domestic debt level suggests a cautious approach to local borrowing, preserving room for future fiscal measures if necessary.
A notable highlight from the report is the sharp increase in Bhutan’s foreign exchange reserves, which grew from USD 647.69 million in Q3 to USD 700.51 million in Q4, marking an impressive 8.16% rise. The growth in reserves strengthens the country’s financial position, providing a crucial buffer against external shocks and supporting the stability of the Ngultrum (Nu). The rise could be attributed to increased export earnings, remittances, or inflows from development partners.
The bureau’s report underscores the importance of balancing debt management with economic growth while maintaining robust foreign reserves to safeguard Bhutan’s economic stability.
A local economist highlighted that the rise in foreign reserves significantly boosts Bhutan’s financial resilience, enhancing the country’s ability to withstand external shocks such as global market fluctuations, currency depreciation, or sudden economic downturns. Strong foreign reserves act as a safety net, allowing the government to maintain essential imports, stabilize the Ngultrum (Nu), and meet external debt obligations without straining the economy.
He also emphasized that an increase in reserves signals confidence in Bhutan’s economic outlook, which can attract foreign investors. Higher reserves often reflect a stable and well-managed economy, encouraging investment inflows, tourism growth, and international trade partnerships.
However, he cautioned that while rising reserves are a positive indicator, it is equally important to balance them with public debt management. High public debt, particularly external debt, can offset the benefits of strong reserves if debt-servicing costs become excessive. Maintaining a healthy ratio between reserves and debt is crucial for ensuring sustainable development and protecting the country from market volatility.
He concluded that Bhutan should adopt a holistic approach to economic management—leveraging growing reserves to support key sectors, encouraging foreign investment, and using revenue from hydropower exports to gradually reduce public debt. This balanced strategy will promote long-term financial stability and sustainable economic growth.
Meanwhile, the report highlighted a decline in revenue collections. In Q3, the Royal Government reported total revenue receipts of approximately Nu 12B, which dropped to about Nu 10B in Q4, a decrease of 18.28%.
Similarly, tax revenue declined from approximately Nu 9B in Q3 to Nu 8B in Q4, a 6.51% drop. Non-tax revenue also decreased significantly from Nu 3B in Q3 to Nu 1B in Q4, a decline of 49.13%.
Revenue from government agencies dropped notably, with current revenues amounting to approximately Nu 487M in Q4, down from Nu 795M in Q3, a decrease of 38.76%.
Government expenditure also fell, standing at approximately Nu 11B in Q4, down from Nu 13B in Q3, a 19.54% decrease. Current expenditure declined from Nu 10B in Q3 to approximately Nu 4B in Q4, while capital expenditures remained steady at around Nu 3B.
The country’s Gross Domestic Product (GDP) for both Q3 and Q4 of 2024 was reported at Nu 249B (approximately USD 3,919.55 per capita). The GDP growth rate was confirmed at 4.88%, reflecting steady economic stability despite global uncertainties.
The agriculture sector contributed 6.57% to the GDP, highlighting its continued importance to the country’s economic stability.
Investment levels remained strong, with investment as a percentage of GDP standing at 45.18%. The savings rate was 19.70%, indicating that Bhutanese households maintained a balanced approach to consumption and savings, positioning themselves to face potential economic challenges.
In terms of trade, exports of goods and services amounted to approximately 28.33% of GDP, while imports accounted for 53.24%. This trade gap highlights a reliance on foreign goods and services, raising concerns about potential trade deficits should global economic conditions deteriorate.
An economist emphasized that diversifying and enhancing local production could mitigate these challenges and promote a more balanced trade economy.
The economist concluded, “The country’s economic landscape in the latter half of 2024 reflects cautious optimism, with consistent GDP growth, controlled inflation, and a strategic approach to foreign reserves and banking sector health. Bhutan remains committed to its vision of sustainable development, with the government’s focus on strengthening economic fundamentals being crucial for future growth.”
Sherab Dorji from Thimphu
