SOEs’ debts soar

It is attributed to increased borrowing for power project

In 2022, the total debt of State-Owned Enterprises (SOEs) increased from Nu 39,359.9 mn (million ngultrum) to Nu 41,785.7 mn, according to the budget report of 2023-2024.This upward trend in debt was primarily driven by amplified borrowing by the Bhutan Power Corporation (BPC), which escalated by a staggering 37 %. The funds acquired were earmarked for the development of transmission lines and projects aimed at electrifying rural areas.

The total government exposure is Nu 40,720.37 mn, with total SOE debt reaching Nu 41,785 mn. Within the SOE debts, the largest sum is owed by BPC, amounting to Nu 17,721.18 mn, followed by Druk Air at Nu 7,092.67 mn, DGPC at Nu 6,556.01 mn, DDCL at Nu 4,964.48 mn, and NHDCL at Nu 947.51 mn

Examining the specifics of the debt composition, figures in the report indicate a varying distribution between short-term and long-term loans.

In 2022, short-term debt amounted to Nu 5,466.31 mn, marking a significant rise compared to the previous years: Nu 4,538.47 mn in 2020 and Nu 3,945.74 mn in 2021. On the other hand, long-term debt showed a steady climb, reaching Nu 36,319.47 mn in 2022, as opposed to Nu 31,310.72 mn in 2020 and Nu 35,414.22 mn in 2021.

Collectively, the total SOE debt figures were recorded at Nu   41,785.77 mn in 2022, reflecting a steady increase from Nu 35,849.19 mn in 2020 and Nu 39,359.96 mn in 2021.

Meanwhile, there are 34 SOEs in Bhutan, which is further divided into two groups, namely commercial oriented and social oriented. These two groups are looked after by the Ministry of Finance and Druk Holding Investment.

SOEs under the MoF, managed by the MoF itself, are categorized into different sectors. In the manufacturing sector, the National Housing Development Corporation Ltd. (NHDCL) holds a 100 %shareholding, Kuensel Corporation Ltd. (Kuensel) holds 51 percent, and the Bhutan Livestock Development Corporation Ltd. (BLDCL) holds 100 percent.

In the trading sector, the Food Corporation of Bhutan Ltd. (FCBL), Bhutan Lottery Ltd. (BLL), and Bhutan Duty Free Ltd. (BDFL) hold 100 %shareholding each.

 Under services, entities like Bhutan Postal Corporation Ltd. (BPC), Bhutan Broadcasting Service Corporation Ltd. (BBSCL), Royal Bhutan Helicopter Services Ltd. (RBHSL), Farm Machinery Corporation Ltd. (FMCL), and Green Bhutan Corporation Ltd. (GBCL) also hold 100 %shareholding. The financial institutions sector includes Bhutan Development Bank Ltd. (BDBL) and National CSI Development Bank Ltd. (NCSIDBL), both with a 100 %shareholding. Furthermore, the National Pension and Provident Fund (NPPF) and Druk Holding and Investments (DHI) are autonomous bodies with 100 %ownership.

Additionally, analyzing the debt exposure in accordance with shareholding patterns, it has been unveiled that the Government had a substantial stake in SOE debt. 97.5% share of the total SOE debt, amounting to Nu 40,720.4mn, was attributed to the Government’s involvement.

The Government played a pivotal role in facilitating borrowing for SOEs through sovereign guarantees. These guarantees were extended to the state enterprises to facilitate borrowing on more favorable terms. The primary objective behind these guarantees was to support priority sectors and projects that held social benefits. As of December 31, 2022, the Government had guaranteed borrowing to the tune of Nu  4,988.1mn, thereby exposing an explicit contingent liability to an equivalent extent of the guaranteed amount.

According to the budget report 2023-2024, these financial developments underscore the delicate balance between borrowing for development initiatives and ensuring responsible financial management. The Government’s involvement in SOE debt through guarantees highlights the significance of sustainable fiscal policies to navigate potential liabilities effectively.

Meanwhile, SOEs under DHI spread across sectors like energy and resources, communication and transport, finance, real estate and construction, trading, and manufacturing. Druk Green Power Corporation Ltd. (DGPC), Bhutan Power Corporation Ltd. (BPCL), Natural Resources Development Corporation Ltd. (NRDCL), and State Mining Corporation Ltd. (SMCL) hold a 100 %shareholding in the energy and resources sector. In communication and transport, Bhutan Telecom Ltd. (BTL) and Druk Air Corporation Ltd. (Drukair) have a 100 %shareholding. Bank of Bhutan Ltd. (BOB) holds an 89 %share in the finance sector.

The real estate and construction sector includes Thimphu Tech Park Ltd. (TTPL) and Construction Development Corporation Ltd. (CDCL) with a 100 %shareholding. In the trading sector, the State Trading Corporation of Bhutan Ltd. (STCBL) holds a 56.6 %share. Manufacturing is represented by Dungsam Cement Corporation Ltd. (DCCL) with 89 percent, Dungsam Polymers Ltd. (DPL) with 51 percent, Bhutan Board Products Ltd. (BBPL) with 57.6 percent, Koufuku International Private Ltd. (KIL) with 100 percent, and Menjong Sorig Pharmaceuticals Corporation Ltd. (MSPCL) with 100 %shareholding.

Tshering Pelden from Thimphu