The national debt will reach 474.42 billion Ngultrum during the 13th Five-Year Plan period

The country’s debt distress is classified as moderate

Thupten Sangpo

The national debt is expected to increase by 61.87% by the end of the 13th Five-Year Plan, soaring from 293.09 billion Ngultrum in March this year to 474.42 billion Ngultrum.

It is expected that during the 13th Five-Year Plan period, the national debt will account for 94.8% of the projected GDP. Of the total national debt, external debt accounts for 82.8% (392.67 billion Nurs) and domestic debt accounts for 17.2% (81.75 billion Nurs).

Hydropower debt is expected to account for 73.3% of total external debt, with non-hydropower debt accounting for the remaining 26.7%.

However, external debt is expected to decline from 92.9% to 78.5% of GDP by the end of the plan.

The World Bank has rated Bhutan’s external debt distress as moderate under the 13th Five-Year Plan. Nevertheless, the accumulation of public debt and concerns about a potential debt crisis remain significant issues.

During the 13th Five-Year Plan period, domestic revenue is expected to be Nu 327.35 billion and subsidies to be Nu 125 billion. Tax revenue is expected to contribute Nu 230.62 billion to domestic revenue, while non-tax revenue will contribute Nu 96.72 billion.

The total budget expenditure during the 13th Five-Year Plan period is 512.29 billion Ngultrum, an increase of 63% over the 12th Five-Year Plan period. Of the total budget, recurrent expenditure is 267.28 billion Ngultrum and capital expenditure is 245 billion Ngultrum.

Total resources are estimated at Nu 456.35 billion and the fiscal deficit is projected at Nu 55.94 billion, equivalent to 2.97% of GDP.

The revenue surplus will cover 24.5% of the capital expenditure, the grant will cover 51% and the remaining 24.5% will be covered through concessional external borrowing and domestic debt market borrowing.

A large part of the external grants, amounting to N85 billion, will be funded by India, while another N40 billion will be obtained through concessional funds from global financial institutions such as the Asian Development Bank and the World Bank.

In addition, domestic funds will be raised through the issuance of government bonds and treasury bills to achieve a balancing strategy for the fiscal deficit.

As of March this year, the national debt stood at N293.09 billion, or 109.8% of the projected GDP for the 2023-24 fiscal year.

Of this, foreign debt is 261.12 billion Ngultrums and domestic debt is 31.97 billion Ngultrums.

The water and power debt is reported to be N167.5 billion, accounting for 64.1% of external debt and 62.8% of the estimated GDP for the fiscal year 2023-24.

The total amount of non-hydropower external debt is N93.62 billion, accounting for 35.9% of the total external debt.

While non-hydro debt remains within the stipulated threshold of 35% of GDP as of March 2022, according to the 13th Five-Year Plan document, averaging 31.5% over the four years of the 12th Five-Year Plan, the overall debt situation requires careful monitoring.

During the 13th Five-Year Plan period, the fiscal deficit will average 3% of GDP, the tax revenue ratio will reach more than 15% of GDP, and the non-hydropower debt ratio of GDP will be limited to below 55%.