2. The Government has recognized the need for a comprehensive public debt policy to proactively guide its investment and ensure that financing decisions are prudent and public debt is maintained at a sustainable level. Following the directives from 40th Lhengye Zhungtshog Session held on June 24, 2014, the Policy was drafted by a Committee comprising of representatives from Ministry of Finance, Royal Monetary Authority, Gross National Happiness Commission Secretariat, National Statistics Bureau and Department of Hydropower and Power Systems.
3. The Policy is governed by the Constitution of the Kingdom of Bhutan, the Public Finance Act of Bhutan 2007, the Audit Act of Bhutan 2006 and the Royal Monetary Authority of Bhutan Act 2010, and amendments thereof.
4. This Policy extends to all Public and Publicly Guaranteed External and Domestic Debt of Bhutan. However, given the nascent stage of development of domestic debt market, the thresholds in this Policy shall apply only to External Debt, until such time the thresholds for domestic debt can be determined to compliment this Policy. The broad guiding principles for raising debt are categorized by type of liability (direct or contingent) and by sector of borrower (General Government, Public Corporations and RMA).
5. Given the unique nature of Bhutan’s debt dynamics, which is primarily driven by investments in the development of hydropower, the thresholds set out in this Policy have been framed in a manner to allow Bhutan to continue to pursue and optimize its hydropower resources. As such, the draft policy provides debt thresholds for two categories of debt viz., (i) Non-hydropower debt (ii) Hydropower debt.
6. The threshold for Non-hydro External Debt, inter alia, shall not exceed thirty-five percent (35%) of GDP during a five- year period. Similarly, for Hydropower External Debt, inter alia, the ratio of hydropower debt service to hydropower export revenue shall be maintained within forty percent (40%), in any given year. The overall threshold for Total External Debt however is, provided in terms of Debt Service Ratio (ratio of annual debt service obligation to exports of goods and services) which shall not exceed twenty-five percent (25%).
7. The thresholds are proposed to reduce the undue debt burden that might arise from indiscriminate borrowing for social projects which do not necessarily generate financial returns. Other considerations are aimed at to ensure fiscal discipline and avoid ad-hoc, short-term borrowing which are generally costly.
8. The Policy was formally approved by Lhengye Zhungtshog during the 109th Session held on 2nd August 2016.
At the invitation of the Government of Islamic Republic of Pakistan, Royal Government of Bhutan participated in the Eight Meetings of the SAARC Finance Ministers and Secretaries in Islamabad, Pakistan. The Finance Ministers’ Meeting was held on 26th August 2016 preceded by the Finance Secretaries’ Meeting on 25th August 2016.
The main objective of the SAARC Finance Ministers was to review the processes towards establishment of the South Asian Economic Union (SAEU).
In this regards, the Islamabad Meeting reviewed the status on economic and financial cooperation including investment, progress in customs cooperation, regional economic integration and SAARCFINANCE. The Meeting also assessed the overall performance economic outlook of each Member State and discussed opportunities/challenges for South Asia.
As the SAARC Finance Ministers in their capacity as the Governing Council of SDF, discussed measures to strengthen SDF and expedite the operationalization of Economic and Infrastructure Windows.
SAARC Finance Ministers normally meet once a year. The Ministers also meet in informal settings on the sidelines of annual meetings of the World Bank and Asian Development Bank. Bi-lateral Meetings between Member States are also organized, when requested.
His Excellency Lyonpo Namgay Dorji, Finance Minister led the Bhutanese delegation to the Eight Meeting of SAARC Finance Ministers. The delegation comprised of senior officials from the Ministry of Finance and Ministry of Foreign Affairs.
The next SAARC Finance Ministers’ Meeting is scheduled in Afghanistan.