Public debt at Nu 223.29bn as of September end

The debt in the hydropower sector constitutes the major portion of the total external debt 75.1%, followed by policy and budget support 10.9% and Central Bank debt 3.3%

The total public debt stood at Nu 223.29bn as of September 30 from the total public debt of Nu 215.37bn on June 30 this year. This means the public debt increased by Nu 7.92bn in a three-month period.

According to the public debt situation quarter report as of September end, the total public debt accounted for 120.8% of Financial Year 2020-21 Gross Domestic Product.

The report states that external public debt increased to Nu 214.9bn from Nu 213.3bn on June 30, 2020, a marginal increase of Nu 1.52bn (0.7%). The increase was mainly attributed due to a loan disbursement for Punatsangchhu-II Hydroelectric Project Authority (PHPA II).

It states that the total domestic debt stood at Nu 8.38bn, an increase of Nu 6.39bn (322.1%) from Nu 1.9bn on June 30, 2020. The domestic debt increased was attributed due to the issuance of T-Bills and Government Bond during the first quarter of FY2020-21. The domestic debt comprised T-Bills stock of Nu 5bn and a three-year government bond of Nu 3bn. A three-year government bond of Nu 3bn was issued at the annual coupon rate of 6.5% in September 2020, which will be redeemed on September 26, 2023.

The rest of the domestic debt was a loan outstanding to the National Pension and Provident Fund (NPPF) borrowed for the construction of staff quarters for the Phuentsholing Hospital and the liquidation of Bhutan Hydropower Services loan to the German Investment Corporation (DEG), Germany.

The government debt accounted for 94.4% of the total external debt. The government debt includes budgetary debt of Nu 39.4bn and of Nu 163.3bn on account of loans on-lent to State Owned Enterprises for carrying socially beneficial projects and development of hydropower projects in the country.

The corporate debt accounted for 2.4% of the total external debt. The corporate debt pertains to loan availed by Drukair from SDF for the purchase of new aircraft (ATR 42-600), and Tangsjibi Hydro Energy Limited from ADB, State Bank of India and EXIM Bank of India for hydropower development.

The Central Bank debt, which is on account of the Standby Credit Facility (SCF) availed from the Government of India (GoI), comprised 3.3% of the total external debt. The Central Bank debt does not include RMA’s currency swap arrangement of Rs 14.27bn with Reserve Bank of India, as it is for short-term rupee reserve management.

The report states that hydropower debt stands at Nu 161.32bn accounting for 75.1% of the total external debt, while the non-hydro debt stands at Nu 53.58bn accounting for about 25% of the external debt. It also states that the non-hydro debt stands at 29% of FY2020-21 GDP was well within the 2016 Public Debt Policy threshold of 35%.

As of September 30, the INR-denominated debt stood at INR 154.24bn, accounting for 71.8% of the total external debt. The INR-denominated debt increased by 2.04bn compared to INR debt on June 30 due to loan disbursements for PHPA-II.

However, there was no loan disbursement for other ongoing hydropower projects during the first quarter of FY 2020-21.

The Convertible Currency (CC) debt stock stood at US$ 821.03mn, an increase of US$ 12.34mn from the US$ 808.69mn on June 30. However, the Ngultrum value of the CC-denominated debt decreased from Nu 61.18bn on June 30 to Nu 60.66bn on September 30 due to the appreciation of the Ngultrum against the U.S. Dollar.

The report also states that 72% of the total external debt is denominated in Indian Rupees (INR), followed by U.S. Dollar which is 25%, Japanese Yen which is 2% and Euro which 1%.

The total external debt servicing in FY 2020-21 is expected to increase significantly compared to debt servicing in FY 2019-20 due to the start of the debt servicing for Mangdechhu Hydropower Project (MHP) and the liquidation of the SCF of Rs 4bn by RMA during the fiscal year.

Therefore, the external debt service to exports is also expected to rise from 6.1% in FY 2019-20 to 19.9% in FY 2020-21.

Dechen Dolker from Thimphu