The Bhutanese Leading the way.
The Druk Nyamrup Tshogpa (DNT) in a second press release this week (a copy of which was not sent to this paper) again alleged that the government was not managing debt well and that the current government’s trends in debt management will make it unsustainable.
DNT quoting the IMF report said the IMF had pointed out that there was a ‘high risk of external debt distress.’ The release said that only as a mitigating factor of debt sustainability, the IMF took into consideration at the micro level that a huge portion of debt was hydro debt and so gave a conditional moderate risk for Bhutan and not ‘just moderate’ as stated by the government.
Lyonchhen, pointing to the report, while acknowledging the above issues said that the report finally says that the debt is moderate.
The DNT using the IMF report gave a picture of increasing debt to GDP ratio from 2013 where it was 93.64 percent to 2017 where it became 112.87 percent.
It was here the Prime Minister pointed out how DNT had given only selective information of the chart till 2017 debt to GDP ratio goes down from 2018 onwards.
Lyonchhen printed out the entire IMF report and shared a copy with the media saying that DNT had used only selective data in its release.
Pointing to the complete report he pointed out that from 2018 onwards there is a fall in debt to GDP ratio from 112.86 percent in 2017 to 106.07 in 2018, 94.85 in 2019, 87.78 in 2020 to 70.37 in 2022 and so on.
He said the debt to GDP ratio would drop because as the hydro projects come online they would not only generate revenue but also start paying off the debt. He said at the same time Bhutan’s GDP would continue to increase over the years.
The PM asked why DNT had hidden this aspect of the IMF report on Bhutan’s decreasing debt to GDP ratio from 2018 onwards. He said it is misleading and shows how DNT is engaging in the politics of fear on the issue.
In addition to this Lyonchhen also pointed to page six of the IMF report which says that, “Hydropower loans from India are more akin to foreign direct investment rather than debt creating loans.”
The report says this is so because India provides explicit guarantees that cover financial and construction risks for the intra-governmental projects and India buys all the surplus power on a cost plus basis that includes a net return of 15 percent.
The report says, “This arrangement significantly reduced the risk of external debt distress.”
The DNT release said, “Even if the government does not care about the concerns and voices of the people, the government must abide by Article 14(5) of the Constitution which states that the government ‘shall ensure that the servicing of public debt will not place an undue burden on future generations’.”
Lyonchhen said it is because the government is concerned about debt that it tackled it and addressed it as the first issue especially with relation to non-hydro debt like rupee loans of 2012 etc. He said that the government had also come up with a Debt Policy that sets limits and conditions on the debt that can be taken.
“We did it as we are responsible and this policy has to go to Parliament if it is to be amended,” the PM added.
The DNT in its release said it will be left to the people to judge if the debt had anything to do with ‘handouts of sheep, shoes and sleek Prados in the later part of its term’.
Here Lyonchhen said that all of the above were not financed from debt. He said that 60 sheep had been given to Merak and Sakteng each. Lyonchhen said that the shoes given were made in Bhutan. On vehicles Lyonchhen said that the only recent vehicles given were Toyota Fortuner to government secretaries and then Pajero SUVs to judges who were supposed to get it as per their Entitlement Act.
DNT said it will not analyze deeper as it is accused of seeking political mileage. Here Lyonchhen said that it is unfortunate that DNT is not analyzing deeper and engaging the government.
“To engage in mudslinging and then withdraw- this is not kindergarten,” said Lyonchhen.
He said DNT talks of nation building but is not showing interest in understanding national processes and the fundamentals of the economy.
Lyonchhen pointed out again that only 21.6 percent of the total debt was non-hydro and even of this the debt for corporations was 3.8 percent which they would pay it themselves. He reiterated that the hydropower debt is self liquidating.
