Bhutan’s external debt is estimated to reach $3.11 billion by the end of June 2021, an increase of 5.8 percent from the last year, according to the country’s annual budget report 2021-22. In June 2020, it was around $2.94 billion.

The expansion is mainly driven by hydro loan disbursements of $136 million in the fiscal year 2020-21 and additional budgetary loan disbursements of around 89 million, mainly from the Asian Development Bank (ADB) and World Bank, reported the national newspaper Kuensel.

The external debt to the GDP ratio is estimated to peak at 125.9 percent in the fiscal year 2022-23 before sliding to 113.7 percent in the following year. 

The projected loan disbursement for Kholongchu and Punatsangchhu-I hydropower projects is among other reasons expected to contribute towards the increase in the external debt-to-GDP ratio. Of the total external debt, hydro projects account for 74 percent. 

Furthermore, to reduce the cost of financing, the government plans to prioritize borrowings from external concessional loans. And the rest will be collected from the domestic market through the issuance of T-Bills and long-term bonds to facilitate the development of a vibrant domestic debt market, the report says. 

Last week on Saturday, the government unveiled a budget of around $1.1 billion for the fiscal year 2021-22 with a focus on sustaining economic activities amid the pandemic.

The economic growth for the year 21-22 is projected at 4.1 percent.

The fiscal deficit--the gap between the government’s revenue and expenditure-- is estimated to widen to $236 million, roughly 8.59 percent of the Gross Domestic Product (GDP).

(SAM)