The Indian ambassador to Bhutan, Pavan K Varma, said that the Government of India (GoI) will standby Bhutan to help tide over the rupee crisis. This, the Indian ambassador highlighted in an interview with The Bhutanese.
The Ambassador said “Bhutan enjoys bipartisan support across political parties in India and India will stand by its commitments as far as economic cooperation with Bhutan is concerned”.
He said that despite its own financial constraints and other factors, the Indian political leadership is very much aware of the situation and will do everything in its capacity to help Bhutan in such a crisis. “Bhutan figures very importantly in the international priorities of India and we have been proving this over the years”.
The ambassador said that the Indian Finance Minister in his budget proposal has already ‘allocated’ INR 26bn as aid to fulfill the commitments India has to Bhutan.
He said that GoI is currently examining the possibility of raising the standby credit line from INR 3bn to INR 10bn as per the request of the Royal Government of Bhutan (RGoB).
As of last week the short-term borrowing of INR was around INR 9.7 bn of which INR 6.8bn is from State Bank of India’s (SBI) overdraft (OD) facility and INR 3bn is the pending debt from GoI.
The government is also planning to increase the limit on SBI’s OD facility so if negotiations are through to increase the limit on the two credit facilites, Bhutan will be able to borrow up to 20 bn.
Earlier, speaking at a press conference, Finance Minister Wangdi Norbu commented on the government’s take on the rupee crunch and highlighted major fiscal policies the government will adopt to curb the rupee shortage. He said that “the GoI has asked us to wait till April when the government of India’s new financial year commences”.
The SBI’s INR 10bn OD facility to the country was liquidated last year by selling USD 200M from RMA’s reserves following which INR borrowings was initiated by RMA to cater to rupee requirements in the country.
The government has proposed to increase the standby credit facility because it was cheaper than the OD as the interest paid on OD at 10% was higher than the credit facility.
Certain quarters of the nation raised concerns about the viability of the hydro power projects in the country as it involves huge INR outflows while importing materials and machinery. However, Mr Varma said the rupee crisis cannot be attributed to hydro power projects. “Hydro power cooperation is funded in INR by GOI. It will not contribute to a rupee outflow except for local work being done by Bhutanese contractors in cases where they import some machinery from India.”
“We believe that hydro power production in Bhutan in cooperation with GOI will go a long way, mitigating the current transient crisis and will ultimately contribute to the prosperity and well-being of Bhutan”, he said.
Earlier, Lyonpo Wangdi Norbu explained that since the money committed was not disbursed on time, the government incurred expenditure of Nu 1.5bn for the small development program which further worsened the rupee shortage. The Indian government is yet to replace the amount. If this money comes we will be better off, he had said then.
Mr Varma said there are procedures to be followed. “Budget session is on and the budget will be fully passed. Once it is passed, it becomes formal and the outflow will be in keeping with the phase demands that different sectors require.”
The ambassador also recommended high-end Indian tourists, more Bhutanese exports and business partnerships among others as a means of enhancing rupee inflow. “We have also been trying to see if India’s business and industry leaders can invest in Bhutan and we have had several very high level delegations visiting Bhutan in recent times,” he said.