This is the first debt sustainability analysis prepared for Bhutan using the debt sustainability framework for low-income countries developed jointly by the IMF and the World Bank. The DSA, produced jointly by Fund and Bank staffs (Guidance Note available via the Internet: http://www.imf.org/external/np/pp/2007/eng/041607.pdf), is based on external and public debt data from the Bhutanese authorities, and on IMF and World Bank staff estimates.
Fiscal year starting July 1.
Domestic debt data compiled by the Royal Government of Bhutan include fixed rate debt relating to the purchase of one airplane for state-owned Druk Air in 2004/05, amounting to about half of total domestic debt. Debt related to the second airplane purchase and other state owned enterprises are not included in the data.
Convertible currency debt includes US$9½ million commercial debt extended by the IFC, making all external debt public or publicly guaranteed.
Punatsangchu II and Mangdechu are at early stages of conception and are not included in the projections.
Puna I’s project capacity will be 1095 MW. The financing terms are: 40 percent grant, 60 percent loan, 10 percent interest rate. The entire financing will be in Indian rupees. Dagachu will be 114 MW. The external financing will be 75 percent in loans, at 7 percent. There is to be a 25 percent equity participation by the RGB.
The addition of accumulated IDC (12 percent of GDP) in 2007/08 to the nominal debt stocks does not affect the public debt-to-GDP ratios in NPV terms (as it is already included), but does explain why the nominal debt-to-GDP ratio remains roughly unchanged in 2007/08, despite rapid GDP growth.
Since hydropower cycles have shaped Bhutanese exports over the past 10 years, the variation of export growth is very high. Applying a one standard deviation shock to export growth actually leads to a reduction in exports.