Prime Minister Dasho Dr Lotay Tshering

Govt to take loans to protect reserves and invest in renewable energy projects

Earlier the Prime Minister Dasho Dr Lotay Tshering said that the main strategy to protect Bhutan’s convertible currency reserves is to take loans from international financial institutions and bilateral partners.

He said that the loans taken will have to be against projects that can generate returns and the best ones in Bhutan are renewable energy projects like Solar and small and medium hydro projects.

Bhutan has been asking its partners and banks if it can take above the limits assigned to it.

The PM said that the finance minister Namgay Tshering is coming back after attending the annual International Monetary Fund (IMF) and World Bank (WB) meetings where the minister has also been in dialogue.

The PM said that per the Public Debt Policy the limit is not to cross 35% of the GDP for non-hydro loans and currently it has reached around 31 to 32% but he said this limit is during normal times.

Lyonchhen said it is okay to breach this limit as a bigger worry than debt would not be having adequate foreign currency as currently Bhutan cannot generate much foreign currency.

The PM also said that as the Federal Reserves is shrinking the dollars in the market and increasing the rates it will only be more difficult and expensive to get such loans in the future.

He said Bhutan can always payback such loans 5 to 10 years down the line as our economy improves.

“We need dollars to get INR and we need INR to fill our BODs,” said the PM.

Lyonchhen said that while taking loans the government also has to be careful as once the money is pumped into the market it can result in higher imports and also inflation.

Lyonchhen said this shows the economic base of the country is still primitive.

He said imports would be okay if around 25 to 30 percent it is in the productive sector like electronics, semi conductors etc which will result in more exports but most of it is construction equipment which is a dead asset and edibles.

On the solar energy front he said the aim is to do around 300 to 400 MW which can help meet the winter shortfall.

When asked if Bhutan’s impending graduation from the LDC status by the end of next year would have an impact, the PM said that when it came to bilateral donors like GoI, Japan etc it would not have an impact.

He said in the case of the EU their assistances run till the end of 2024. Lyonchhen also said that graduation does not mean all the support is pulled away at once and the mandate of the UN is to ensure that the countries do not fall back though there are some impacts.

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