Public debt increased by 4% in June-end

The total public debt accounted for 130.9% of the FY 2021-22 GDP estimate

The total public debt increased by Nu 9.8bn in the three months period from April to June end of this year.

The total public debt was at Nu 257.58bn as of June this year, while it was Nu 247.68bn at March end of this year.

However, the total public debt stock increased by 4% and the total public debt accounted for 133.6% of the FY 2021-22 Gross Domestic Product (GDP) estimate.

According to the total public debt report of the second quarter, the external debt stock increased by Nu 7.4bn which constitutes 3.3% mainly on account of disbursement received under program borrowing from the World Bank and JICA, and hydropower loans.

Internally, the issuance of government bonds during the quarter contributed to the increase in the domestic debt stock by Nu 2.4bn. It has increased by 9.7% compared to the previous quarter.

The report further bifurcates the external debt into three categories, including government debt, corporate debt, and Central Bank debt as of June-end of this year.

It states that the government debt amounted to Nu 211bn, accounting for 91.9% of the total external debt.

The government debt includes debt on account of borrowings for budgetary activities, the development of hydropower projects, project loans availed by the government, and lending to public corporations.

Corporate debt pertains to borrowings directly contracted by public corporations. It amounts to Nu 11.5bn and accounts for 5% of the total external debt.

“The standby credit facility with the overnment of India makes up 3% of the total external debt and is classified as Central Bank debt,” states the report.

External Debt

As of March-end of this year, the hydropower debt stood at Nu 163.04bn, constituting 71% of the total external debt and 84.6% of the FY 2021-22 GDP estimate. The hydro debt comprises a debt stock of six hydro projects of MHPA, Puna-I, Puna-II, Nikachu, Dagachu, and Baoschu.

However, the non-hydro debt stood at Nu 66.4bn which constitutes 29% of the total external debt and 34.5% of the estimated GDP.

“The non-hydro debt to the GDP of 34.5% is within the 35% threshold prescribed by the public debt policy 2016,” the report states.

Further, the INR-denominated debt accounted for 67.7% of the total external debt, of which 95.5% was hydropower debt as of June this year. The hydro Rupee debt stock of Nu 148.3bn includes a common Rupee loan of Nu 3.24bn availed by the Tangsibji hydro-electric project from the SBI in 2015.

“During the quarter, the INR-denominated debt increased marginally by Rs 439.5mn from the previous quarter owing to disbursement from Puna-I,” the report states.

Further, the convertible currency debt stock stood at USD 937.65mn, which is equivalent to Nu 74.12bn, accounting for 32.3% of the total external debt.

The Ngultrum value of the convertible currency debt stock increased by Nu 6.85bn from the total convertible currency debt stock of Nu 67.2bn of March this year.

The increase was mainly owing to the budgetary support loan disbursement from the World Bank and JICA and ongoing project loan disbursements during the quarter.

The government of India remains the country’s largest creditor with 66% of the external debt, followed by the ADB with 15%, and the IDA with 14%. The rest is about 5% from others.

Domestic Debt

The total domestic debt stock stood at Nu 28bn, accounting for 14.6% of the GDP and 10.9% of the total public debt stock.

However, the domestic debt mainly comprised T-Bill stock of Nu 15.5mn and the government bonds of Nu 12.2mn.

A series of government bonds were issued including a three-year government bond of Nu3mn issued in September 2020, 10 years government bond of Nu 7mn in February last year, and 10 years government bond of Nu 3mn in February this year.

Further, the government-issued bond of Nu 1.5mn in April and 12 years bond of Nu 4mn in June this year.

According to the report, the domestic debt increased by Nu 2.48bn compared to the domestic debt at the end of the previous quarter owing to the new issuance of government bonds during the quarter for deficit financing.

The balance was loan outstanding to the National Pension and Provident Fund (NPPF) borrowed for the refinancing of the Bhutan Hydropower Services loan to the Deutsche Investitions (DEG), Germany, according to the report.

Thus, the domestic debt increased by Nu 2.48bn compared to the domestic debt at the end of the previous quarter due to the issuance of government bonds during the quarter for deficit financing.

Kinley Yonten from Thimphu