32 bn internal debt in Government Bonds and T-Bills

USD Reserves at USD 589 mn

When the new government came into office they were left with Nu 22.1 bn in government bonds debt and Nu 9.8 bn in Treasury bill debts, both of which are the highest ever.

Both borrowings are from the domestic market and primarily from Financial Institutions.

The former government had to resort to them given the impact of the pandemic on the economy and subsequent shortfalls in revenue.

Bhutan during this stage saw record high fiscal deficits and it is now evident that the former government had to use this to balance the budget.

Bonds are long term borrowings by the government from the domestic market while T-Bills are short term arrangements for 91 days and it can choose to renew them.

The current government had to refloat Nu 6.8 bn in T-Bills for redemption of the earlier bills.

The bonds will be reflected in the national debt of around 280 bn as of January 2024 but T-Bills will not be reflected there.

The first bond called RBOG001 was floated on September 2020 along with an explanation of why it was being done. It was a Nu 3 bn bond maturing on September 2023 with a coupon rate of 6.5%.

At the time the government said with the onset of COVID-19 pandemic, the Government re-emphasizes the need of promoting capital market development through issuance of long-term Government Bonds with the maturity ranging from 3 years to 7 years during the FY 2020-21.

It said the main objective of issuing the long-term Bonds includes; creating new opportunities for investment for financial institutions and other eligible domestic investors, managing fiscal financing need of the Government and also to promote secondary market trading in Bonds for domestic liquidity management through participation of the RMA during the time of liquidity shortfall in the economy.

‘Against these imperatives, the Royal Government of Bhutan and the RMA urges all the potential investors to participate in promoting domestic bond market and support the economy in fighting the pandemic,’ it said. 

The next bond was floated on February 2021 for Nu 700 mn for 10 years till 2031.

In February 2022, another bond of Nu 3 bn was floated and sold for 10 years till February 2032 at a coupon rate of 3.49%.

In April 2022, a 7-year bond of Nu 1.5 bn was floated and sold with maturity in April 2029.

Then on June 2022 a 12-year bond of Nu 4 bn was sold with maturity on June 2034.

In January 2023, a 10-year bond of Nu 2.5 bn was sold with the maturity date falling on January 2033.

In February 2023, another 10-year bond of Nu 1.250 bn was sold with maturity on February 2033.

A 9-year bond of Nu 5 bn was sold on May 2023 with it maturing on May 2032.

Another 5 bn bond was floated on June 2023 for five years with maturity on June 2028.

The next bond that was floated was in November 2023 for Nu 5 bn with a maturity date on November 2025.

The bonds may have started as a way to get money for various expenditures but it will now be a loan burden on the current government and on the next government which will have to clear the bonds.

This national debt is set to rise above the 280 bn as DGPC will be borrowing Nu 14 bn from banks in India for the many small hydro projects it is doing.

In the meantime, Bhutan’s Foreign Reserves are at USD 589 mn which is above the USD 464 mn critical level that would trigger further import restrictions.

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