Nu 2B ESP budget to rescue NPL

Nu 2B ESP budget to rescue NPL

During the question and answer session of the Fourth Parliament on July 5, 2024, Finance Minister Lekey Dorji stated that approximately Nu. 2 billion (B) has been earmarked separately to inject into Financial Institutions (FIs).

Additionally, the Finance Minister mentioned that through the Economic Stimulus Programme (ESP) budget, the government aims to address challenges related to Non-Performing Loans (NPLs) across all sectors nationwide.

In response to Member of Parliament (MP) Sonam Tashi from the Lamgong-Wangchang Constituency, who raised concerns about ongoing difficulties faced by business owners unable to restart their activities despite loan deferrals and interest waivers, the Finance Minister highlighted that the government and the central bank are actively working on these issues. He noted that the central bank has implemented various solutions, including loan deferment, restructuring, and extending loan repayment periods from 5 years to 10 or 15 years, among others.

The Minister emphasized that the ESP will target high non-performing loans and improve liquidity in FIs, thereby making loans more accessible to entrepreneurs, farmers, businessmen, and others.

MP Sonam Tashi further emphasized the significant increase in non-performing loans and queried whether the government would consider implementing temporary measures to allow affected businesses access to new loans and bank guarantees to aid in their recovery and stabilization.

Meanwhile, MP Yeshey Jamtsho from the Nanong-Shumar Constituency queried the Finance Minister about the government’s commitment to raising the Loan-to-Value (LTV) mortgage ratio for home and apartment purchases or house construction purposes from the current 70% to 95%, in consultation with the central government, with a lower interest rate of 4%.

The MP also highlighted the government’s pledge to increase the Debt Equity for vehicle purchases, such as taxis and trucks, from the current 50% to 80%.

In response, Finance Minister Lekey Dorji emphasized the importance of home ownership for Bhutanese living abroad, stating that the government has engaged in discussions with FIs regarding a 4% interest rate. He added that details are being finalized within the ESP for a special subsidy, which will extend over an estimated tenure of 30 years.

Regarding the Debt Equity for vehicle purchases, the Minister mentioned ongoing efforts to establish loan values, specifically citing a 50% loan value for trucks and a 70% loan value for electric vehicles (EVs) and buses, with details soon to be announced to the public.

By Sherab Dorji, Thimphu