Total public debt declined by Nu 526mn in September end

The debt in the hydropower sector constitutes the major portion of the total external debt at 75%, followed by corporate with 12.8% and Central Bank debt at 3.1%

In the three months from June to September of this year, the total public debt stock declined by Nu 526mn from the preceding quarter. This is because both the internal and external debt stock decreased by Nu 500mn and Nu 26mn. 

However, the total public debt stood at Nu 256.9bn as of September end from the total public debt of Nu 257.5bn in June end of this year.

According to the public debt situation quarter report, the total public debt accounted for 124.5% of the FY 2022-23 Gross Domestic Product estimate. The report also states that the total public debt declined marginally, which is -0.20% compared to the public debt stock on June 30, this year.

The report of the external debt shows that the government debt of Nu 210.4bn accounts for 91.7% of the total debt external debt. It includes borrowings for budgetary activities, hydropower projects, and loans availed by the government and on-lent to public corporations.

In addition, corporate debt pertains to borrowings directly contracted by the public corporation. Its amounts to Nu 11.9bn and accounts for 5.2% of the total external debt. The standby credit facility with the GoI makes up 3.1% of the total debt and is classified as central bank debt.

Among the external debt, the hydropower debt stood at Nu 162.8bn constituting 71% of total external debt and 78.9% of the FY 2022-23 GDP estimate. The hydro debt comprises the debt stock of six hydropower projects of MHPA, Puna-I, Puna-II, Nikachu, Dagachu, and Basochu.

However, the non-hydro debt stood at Nu 66.5bn constituting 29% of total external debt and 32.3% of estimated GDP, the non-hydro debt to GDP of 32.3% is within the 35% threshold prescribed by public debt policy 2016.

It is almost three-fourth of the external debt that accounts for debt contracted for financing hydropower projects in the country, followed by budget support from the World Bank, ADB, and JICA at 16%. Others include borrowings for financing infrastructure development, such as rural electrification, agriculture, road connectivity, trade infrastructure, and urban development.

A major portion consisting of 68% of the countryโ€™s external debt is denominated in Indian Rupee, followed by denominations in SDR, USD, EUR, and JPY with 21%, 8%, 1%, and 2% respectively.

In terms of currency, as of September, the INR- denominated debt accounted for 67% of total external debt, of which 95.5% was hydropower debt. The INR-denominated debt decreased marginally by Rs 371.4mn from the previous quarter.

The convertible currency (CC) debt stock at US$907.34mn, equivalent to Nu 74.4bn, accounting for 32.4% of total external debt. The Ngultrum value of CC debt stock increased marginally by Nu 345.3mn from the total CC debt stock of Nu 74bn of 30 June, this year. The increase was mainly owing to the ongoing project loan disbursement during the quarter.

Meanwhile, the domestic debt stock stood at Nu 27.5bn accounting for 14.3% of the estimated GDP and 10.7% of the total public debt stock.

The domestic debt mainly comprised T-Bill stock of Nu 15,000mn and government bonds of Nu 12,200mn. A series of government bonds were issued including a 3-year government bond of Nu 3,000mn on September 2020, a 10-year government of Nu 700mn in February 2021, a 10-year government bond of Nu 3,000mn in February 2022, a 7-year government bond of Nu 1,500mn in April 2022, and a 12-year government bond of Nu 4,000mn were issued in June this year.

However, the domestic debt decreased by Nu 500mn compared to the domestic debt at the end of the provisions quarter.

The high repayment of Ngultrum-denominated debt in FY 2022-23 is due to the redemption of Nu 15,000mn T-Bills stock, which will be maturing this month and the coming month of November. Similarly, the 3-year government bond of Nu 3,000mn issued in September 2020 will be maturing in FY2023/24.

Further, the government-guaranteed outstanding loans stood at Nu 5.3bn accounting for 2.6% of the estimated GDP. This included the sovereign guarantee of Nu 561mn provided for credits sanctioned under the National Credit Guarantee Scheme. The sovereign guarantee was within the threshold of 5% of GDP.

Kinley Yonten from Thimphu