The Bhutanese Leading the way.
The government has allocated Nu 13.3 billion (bn) for total debt servicing in FY 2024/25, a decrease from Nu 14.6 bn in the previous fiscal year. This includes both principal repayments and interest payments for domestic and external debt obligations.
Debt servicing through the budget increased significantly in FY 2023/24, rising from Nu 9 bn in FY 2022/23 to the highest recorded amount of Nu 14.6 bn. The latest budget estimates indicate a decline in FY 2024/25, though external debt servicing continues to grow.
A significant portion of Bhutan’s debt servicing in FY 2024/25 will go toward external debt repayments, which are projected to reach Nu 10.6 bn under the budget. This marks an increase from Nu 9.4 bn in FY 2023/24 and Nu 8.5 bn in FY 2022/23, reflecting the country’s growing external debt obligations.
In contrast, domestic debt servicing is expected to decline sharply in FY 2024/25, with allocations dropping to Nu 2.6 bn, compared to Nu 5.2 bn in FY 2023/24. The previous year had witnessed a surge in domestic debt servicing, which had risen from Nu 632 million (mn) in FY 2022/23. The decline in FY 2024/25 suggests a reduced burden on domestic debt repayments.
Debt service as a percentage of domestic revenue has fluctuated over the past three years. In FY 2022/23, it stood at 18.3%, increasing to 24.0% in FY 2023/24, and is projected to decline slightly to 22.3% in FY 2024/25. This remains within the 35% threshold prescribed in the Public Debt Management Policy 2023, indicating that the government is operating within its debt management framework.
However, domestic revenue is expected to decline slightly in FY 2024/25, from Nu 60.9 bn in FY 2023/24 to Nu 59.8 bn. A reduction in government revenue could impact the fiscal space available for future debt repayments and public spending.
Bhutan’s total external debt servicing, which includes both on-budget and off-budget payments, is projected to increase to Nu 11.6 bn in FY 2024/25, up from Nu 10.4 bn in FY 2023/24 and Nu 9.2 bn in FY 2022/23.
One key metric used to assess external debt sustainability is the external debt service-to-exports ratio, which measures how much of the country’s export earnings go toward repaying external debt.
The ratio has remained stable at 13.9% in FY 2022/23 and FY 2023/24 and is expected to decline slightly to 13.4% in FY 2024/25. This suggests that exports are growing at a faster rate than external debt service obligations, helping maintain a steady balance.
The nominal GDP is projected to increase from Nu 238 bn in FY 2022/23 to Nu 301 bn in FY 2024/25, indicating economic growth. Similarly, exports of goods and services are expected to rise from Nu 66 bn in FY 2022/23 to Nu 86.6 bn in FY 2024/25, reflecting improved trade performance.
