Sectoral Credit grows by almost 16.9%

More than half of the credit was availed by the housing sector

The financial institutions (FIs) in the country absorbed about Nu 209.41bn as sectoral credits as of September this year. Banking and non-banking FIs like Bank of Bhutan Limited (BoBL), Bhutan National Bank Limited (BNBL), Druk PNB Bank Limited, Royal Insurance Corporation of Bhutan Limited (RICBL) and Bhutan Insurance Limited (BIL) together saw 16.9% growth in their sectoral credits compared to the same period last year.

This growth, according to a recent report by the Royal Monetary Authority (RMA) of Bhutan, was attributed to strong demand in the housing sector with about Nu 60.5B.

A rough calculation of sectoral credit shows that the credit grew by about Nu 35.58B in September this year compared to last year. The sectoral credit in September 2022 accounts for about Nu 173.83B.

The sector includes the agriculture and livestock sector, trade and commerce sector, production and manufacturing sector, service and tourism sector, the housing sector, transport sector, personal loan, staff loan, education loans, mining and quarries, and forestry and logging, amongst others.

The housing sector had the highest sectoral credit with about Nu 60.5B, followed by the hotel and tourism sector with about Nu 25.5B, and the production and manufacturing sectors with almost Nu 21.7B.

The incorporation of new sectors in the sectoral credit such as loan to contractors, loans against term deposits, mining and quarrying, forestry and logging, loans to financial service providers, and medical loans amongst others, has led to an increase in sectoral credits. The newly incorporated sectors contributed almost about Nu 19.08B.

In contrast, the less sectoral credit was contributed by medical loans, loans from financial service providers, education loans and service sector, contributing Nu 2.43M, Nu 6.70M, Nu 44.95M and Nu 47.55M each.

For instance, about Nu 199B was deposited by government corporations, individuals and others as of September this year, which was an increase of about 5.52% compared to the same period last year. It was an increase of about Nu 11B.

The increase in the deposit is attributed to demand deposit of about Nu 100B in September 2023, as compared to about Nu 98B in September 2022. Similarly, time deposit is also attributed to the increase in deposits with contribution of about Nu 99B and Nu 89B each in the year 2023 and 2022 of the same month.

Meanwhile, the report also shows decreased national debt by about Nu 4B which represents decrease by 1.5% in the three month period from June to September end this year, taking the total public debt to about Nu 272.9B compared to a total public debt of about Nu 276.98B at the end of June. The national debt now stands equivalent to 134.8% of the GDP.

According to the report, the decrease in the national debt is attributed to a 20% decline in the domestic debt. Similarly, the convertible currency (CC) debt stood at Nu 84.03B, equivalent to USD 1.059B and representing 35.7% of the total external debt. The Ngultrum value of CC debt stock increased by about Nu 4.14B, largely owed to the ongoing project-loan disbursement during the quarter, and the depreciation of BTN against USD.

According to the Ministry of Finance (MoF), the debt service as a percentage of government revenue is estimated at 32.4% for this fiscal year, which is within the threshold of 35% in the Public Debt Management Policy 2023.

The report states that despite elevated levels of total public debt at 134.8% and external debt at 119.0% of GDP, “the overall risk is deemed manageable, and external debt distress is considered moderate.”

Sherab Dorji from Thimphu