Bhutan’s total public debt declined marginally in the September quarter of 2025, remaining within established fiscal policy thresholds, according to the latest Public Debt Situational Report.
As of 30 September 2025, total public debt stood at Nu 302,707.13 million, equivalent to 86.9 percent of the country’s estimated gross domestic product (GDP). This represents a quarterly reduction of Nu 1,258.10 million, or 0.4 percent, compared to the previous quarter.
The modest decline was driven primarily by a significant contraction in domestic debt, which fell by Nu 2,735.94 million, or 11.1 percent. In contrast, external debt increased by Nu 1,477.84 million, reflecting a 0.5 percent rise over the same period.
External debt remains the dominant component of Bhutan’s public debt, accounting for Nu 280,796.16 million, while domestic debt stood at Nu 21,910.97 million.
Government borrowings constituted the bulk of external debt at Nu 265,879.51 million, representing 94.7 percent of the total. Corporate external debt amounted to Nu 4,916.65 million (1.8 percent), while the Standby Credit Facility with the Government of India, classified as central bank debt, stood at Nu 10,000 million, accounting for 3.6 percent.
Hydropower-related borrowings continue to anchor Bhutan’s external debt profile. As of end-September, hydropower debt totaled Nu 169,081.16 million, accounting for 60.2 percent of external debt and 48.5 percent of GDP.
These liabilities are associated primarily with major hydropower projects including Mangdechhu, Punatsangchhu I and II, Nikachhu, Dagachhu, Basochhu (Upper Stage), as well as several smaller hydropower developments.
Non-hydropower external debt stood at Nu 111,715.00 million, comprising 39.8 percent of external debt and 32.1 percent of GDP.
Debt denominated in Indian Rupees (INR) amounted to Nu 181,704.28 million, representing 64.7 percent of total external debt, with more than 85 percent of this exposure linked to hydropower financing.
Convertible currency (CC) debt totaled USD 1,115.40 million, equivalent to Nu 99,091.88 million, or 35.3 percent of external debt. The CC debt stock increased by Nu 2,975.89 million during the quarter, largely due to fresh disbursements and exchange rate movements.
India remained Bhutan’s largest external creditor, accounting for 63 percent of total external debt, followed by the Asian Development Bank (17 percent) and the International Development Association (14 percent). Overall, bilateral debt comprised 67.7 percent, while multilateral borrowings accounted for 32.3 percent of total external debt.
According to the Ministry of Finance, debt servicing pressures remain manageable. Total debt service is projected at 32.7 percent of government revenue in FY 2025–26, staying within the 35 percent ceiling prescribed under the Public Debt Management Policy 2023.
External debt service is expected to absorb approximately 19.5 percent of export earnings in the same fiscal year.
Domestic debt declined to Nu 21,910.97 million, equivalent to 6.3 percent of GDP and 7.2 percent of total public debt. This comprised mainly outstanding government bonds valued at Nu 21,098.05 million and Ways and Means Advances from the Royal Monetary Authority totaling Nu 812.92 million.
Central government debt stood at Nu 111,595.66 million as of end-September, accounting for 36.9 percent of total public debt and 32 percent of GDP—comfortably below the policy ceiling of 55 percent of GDP.
While public and external debt levels remain elevated, the Ministry of Finance has assessed overall fiscal risks as moderate. Hydropower loans—predominantly INR-denominated and supported by assured electricity exports to India—are considered low-risk.
Most borrowings carry fixed interest rates and long average maturities, mitigating refinancing and interest rate risks. External repayments are projected to peak in FY 2026–27, primarily due to the settlement of Standby Credit Facilities with India, and remain relatively high until the late 2030s as major hydropower projects enter their repayment phases. Repayment pressures are expected to ease thereafter.
As of June 2025, government-guaranteed loans stood at Nu 3,762.86 million, equivalent to 1.2 percent of GDP, with no claims invoked under expired guarantee schemes.
Overall, Bhutan’s public debt portfolio remains sustainable, underpinned by concessional borrowing terms, long maturities, and hydropower revenues that continue to provide a buffer against external shocks.
Nidup Lhamo
From Thimphu
