Public Debt projected to increase over the years

The total debt projection for the period 2013-2014 and 2017-2018 shows an increasing trend. By the end of the period, the public debt figure is projected to be Nu 258.78 bn. The debt to GDP ratio will be over 120 percent, according to the report of the Royal Audit Authority (RAA) presented by the Public Accounts Committee (PAC).

The chairperson of the PAC, Ngalam-Pemagatshel MP, Choida Jamtsho, presented the report on the Public Accounts Committee to the joint sitting of the Parliament yesterday.

The report states that the Indian rupee debt is projected to constitute over 73 percent of the public debt. However, since 9th Five-Year Plan, the major portion of the debt is due to investment in the construction of hydropower projects.

The debt to GDP ratio was 69.94 percent by the end of 9th Five-Year Plan and increased to 92.14 percent by the end of the 10th Five-Year Plan.

Hydro power debt had increased from Nu 16.15 bn to Nu 20.47 bn (an increase of Nu 4.32 bn) representing an average of 64.38 percent of the total public debt during the 9th Five-Year Plan.

Similarly, during 10th Five-Year Plan, it has increased from Nu 35.97 bn to Nu 54.52 bn (an increase of Nu 18.55 bn) representing an average of 62.47 percent to the total public debt, as per the report.

Though the ratio of hydropower debt to total public debt to total public debt had decreased during the 10th Five-Year Plan as compared to the 9th Five-Year Plan, the absolute amount had increased from Nu 20.47 bn to Nu 54.52 bn (an increase of Nu 34.05 bn), according to the report.

Report says that the hydropower debt to GDP was around 50 percent during the 9th Five-Year Plan period, and around 56 percent during the 10th Five-Year Plan.

Further, the hydropower debt is not considered risky, in terms of debt servicing, since the payments were projected to be met from the projects on their commission.

The debt outstanding as of June 2013 stood at Nu 94.50 bn. According to the report 72.06 percent of the debt outstanding in the respective years on average comprised government corporate debt (including hydropower debt) followed by government debt at 20 percent.

The report also revealed that central bank debt represented about 7.94 percent, which was availed for Balance of Payment purpose in the form of Government of India (GoI) Standby Credit Facilities (SCF) and SWAP arrangement.

The total debt stock including various government guarantees stood at Nu 97.09 bn as of 30 June 2013.

The report says that during the end of March this year, the total Public Debt stood at Nu 118.54 bn and an external debt of Nu 114.07 bn.

Meanwhile, RAA recommendation points to a clear policy framework on public debt management. Therefore, the Ministry of Finance stated that a draft Public Debt Policy will submitted to the government soon.

The deliberation on the Bill will continue in the Parliament on Monday.

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