Kuenzang Choden / Thimphu
The economic affairs minister, Khandu Wangchuk who recently visited the Indian Capital to follow-up on the increase in the Line of Credit announced that the Indian Government has assured the increase from Rs 3bn to 10bn, in a press conference yesterday.
“India itself is going through a lot of financial problems. And in many ways this was not the best timing to go to India- the political and economical and also Indian dignitaries were very busy. Despite all these problems, when it came to Bhutan the Indian leadership were really supportive,” said the minister.
Bhutan had a credit line of 3bn at 5% interest rate. Initially, the Bhutanese government requested an increase in the credit line from 3bn to 6bn last year. Again this year in the month of March, on the account of rupee crisis the line moved to 10bn.
This comes in the light of the Rupee borrowings by the RMA through the overdraft facility from the State Bank of India (SBI) had reached its limit of Rs 10bn and the other line of credit from the government of India (GoI) of Rs 3bn limit got exhausted last year. The interest on SBI borrowings stands at 9.5% and 5% on the latter.
The Minister reported that the Indian Parliament which was in session had processed 3bn based on the government’s request. The 4bn additional came late as a result it couldn’t be incorporated in the Indian government’s project. “Now what they have agreed is to make internal adjustments because if we have to wait for supplement budget it will take time. So they can provide Rs 4bn through appropriation,” he said.
The 3bn from the 6bn is to be released very shortly after the GoI instructs the ambassador here to sign the MoU. For the Rs 4bn a note has to go to the cabinet and once that is approved the finance ministry will submit and release. “Basically the 10bn is agreed,” added the minister.
Also the GoI agreed to maintain the interest at 5% as per the request made by the government due to the mounting cost of borrowings plus the interest.
Further he also said that they (GoI) have gone out of their way despite their own problems to provide and they have also stated that 10bn enhancement they will undertake and if Bhutan requires additional assistance on account of various problems and development they would stand ready to provide all the required assistance.
The increase in the line of credit is to contribute to normalizing and meeting the rupee shortfall to the certain extent. It will be used to meet the rupee shortfall and also for the priority sectors, wherever the priority the government decides.
The GoI have also released Rs 5.6bn for Small Development Project and there is also some more coming for that as well. They have released Rs 1.89bn for the three hydropower projects. “There is a balance of 3.3bn even for this quarter and this also by next week or ten days it will be coming,” he said adding that the government is working towards ensuring that the rupee shortage is minimal and its impact on our essential import and development works are minimized.
In March, a lot of things compiled owing to reasons such as releases couldn’t come because of budgetary processes in India, hydropower earnings were lowest in the winter months, debt repayment came up in January for Kurichhu and Tala and others.
Now with the releases coming in and the money from hydropower, the minister is optimistic that the ‘better spell’ is coming after the ‘dry spell’ which would bring about major improvement in the situation.
The RMA and Finance Ministry would look at how best to, save cost and reduce cost in borrowings and at the same time look at the essential imports for development.
It is for us to see how best to utilize the rupee that we have access to. The line of credit is for five years, we have to find ways to repay it though internal revenues and ultimately it will be hydropower projects that have to contribute, added the minister.