[{"data":1,"prerenderedAt":-1},["ShallowReactive",2],{"doc-detail-111172-en":3,"doc-seo-111172-105":29,"detail-sidebar-cat-0-en-105":91},{"code":4,"msg":5,"data":6},0,"success",{"doc_id":7,"user_id":8,"nickname":9,"user_avatar":10,"doc_module":4,"category_id":11,"category_name":12,"doc_title":13,"doc_description":14,"doc_content":15,"file_id":16,"file_url":17,"file_type":18,"file_size":19,"view_count":20,"is_deleted":4,"is_public":20,"is_downloadable":20,"audit_status":20,"page_count":21,"language":22,"language_code":23,"site_id":24,"html_lang":23,"table_of_contents":25,"faqs":26,"seo_title":13,"seo_description":14,"update_tm":27,"read_time":28},111172,962075006959,"Anda","https://ap-avatar.wpscdn.com/avatar/e0002397efbe92a78e?_k=1776741047341049297",8,"Research & Report","Bhutan - Joint World Bank-IMF Debt Sustainability Analysis - Moderate Risk Assessment","Bhutan’s overall and external debt distress risk is assessed as moderate, unchanged from the 2024 DSA, despite mechanical signals indicating breaches of some threshold indicators under the baseline scenario. Judgment is applied due to the specific nature of hydropower-linked loans from the Government of India, where financial and construction risks are covered and surplus electricity is purchased on cost-plus terms. Even under the moderate rating, Bhutan is assessed to have limited capacity to absorb additional shocks, especially export shocks. A path to lower risk relies on fiscal consolidation supported by revenue mobilization, a stable INR peg, non-hydropower productivity and competitiveness reforms, and strengthened debt management.","Public Disclosure Authorized  \nPub lic Disc losure Authorized  \nApproved by:  \nManuela Francisco and Sebastian Eckardt (IDA) , and Corinne Deléchat and Tokhir Mirzoev (IMF)  \nPrepared by the staff of the International Development Association (IDA) and the International Monetary Fund (IMF) 1  \n\n| BHUTAN: JOINT BANK-FUND DEBT SUSTAINABILITY ANALYSIS |  |\n| --- | --- |\n| Risk of external debt distress | Moderate |\n| Overall risk of debt distress | Moderate |\n| Granularity in the risk rating | Limited space to absorb shocks |\n| Application of judgment | Yes. Risk of debt distress is assessed as moderate due to the FDI nature of hydro-related loans and mitigating factors for new hydro projects |\n\nBhutan’s risk of overall and external debt distress is assessed as moderate, unchanged from the 2024 DSA.2 While the mechanical results point to a high risk of overall and external debt distress, with breaches in the thresholds for some indicators under the baseline scenario, judgement was applied given the unique mitigating factors. Most of the outstanding public and publicly-guaranteed debt is linked to hydropower project loans from the Government of India. These are implemented under an intergovernmental agreement in which the Government of India covers both financial and construction risks and commits to buy all surplus electricity at a price reflecting cost plus a margin. New hydro projects are envisaged as joint ventures with the private sector and are expected to also include mechanisms to mitigate risks. Within the moderate rating, Bhutan is assessed to have limited space to absorb additional shocks, particularly export shocks. Going forward, a robust fiscal consolidation underpinned by revenue mobilization, a stable peg with the Indian rupee, reforms to improve productivity and competitiveness of the non-hydropower sector, and enhanced debt management would help to reduce the risk of debt distress.  \n1 Prepared in accordance with the Guidance Note of the Joint Bank-Fund Debt Sustainability Framework for Low Income Countries , February 2018.  \n2 As in the past DSA, Bhutan’s debt-carrying capacity is assessed as strong. Its composite index is estimated at 3.08 and is based on IMF’s October 2025 WEO and World Bank’s 2024 Country Policy and Institutional Assessment (CPIA) .  \n1. The coverage of public debt in this debt sustainability analysis (DSA) includes public and publiclyguaranteed (PPG) debt. PPG debt covers the non-financial public sector and the central bank. It includes debt contracted by the central government, central bank (that is, the Royal Monetary Authority or RMA) debt (such as the standby credit facilities extended by the Government of India and bilateral swap lines, BSL, guaranteed by the government, which were not included in the 2024 DSA)3 , and non-financial state-owned enterprises (SOE) debt, both external and domestic.4 His Majesty’s Secretariat liability to the Royal Monetary Authority (RMA) arising from the Central Bank of Kuwait deposit has been included as domestic debt.5 As in the 2024 DSA, SOE debt includes non-guaranteed domestic SOE debt in line with the authorities’ commitment under the World Bank’s First Green and Resilient Growth Development Policy Credit (DPC) operation.6 The DSA, however, excludes the special purpose vehicles (SPVs) which are SOEs formed as part of the financing of new hydro projects (Khorlochhu and Dorjilung) as, given information up to the writing of this DSA, they are consistent with the exclusion conditions listed in Annex 3 of the LIC-DSA Guidance Note7 , and include mitigating factors (see Annexes 1 and 2) . Bhutan’s local governments, social security fund, and extra budgetary funds do not have any outstanding debt. The external debt definition is based on residency. The calibration of the contingent liability shock includes the outstanding amount of the National Credit Guarantee Scheme as of end-June 2023 (0.2 percent of GDP). It also preserves the default value for the finan","cbCaiujsoAopgW3F","https://ap.wps.com/l/cbCaiujsoAopgW3F","pdf",1112432,1,31,"English","en",105,"# Risk Assessment Summary\n## Overall risk of debt distress\n## External debt distress and judgment\n# Debt Coverage and Methodology\n## Public and publicly-guaranteed debt scope\n## Contingent liability and shock calibration\n## Treatment of hydropower SPVs and mitigating factors\n# Risk Reduction Framework\n## Fiscal consolidation and revenue mobilization\n## Exchange rate stability and sector reforms\n## Debt management improvements","[{\"question\":\"Why is Bhutan’s debt distress risk rated moderate despite threshold breaches?\",\"answer\":\"Judgment is applied because hydropower loans have unique mitigating factors, including intergovernmental arrangements with the Government of India that cover financial and construction risks and include cost-plus electricity purchase terms.\"},{\"question\":\"What explains Bhutan’s limited space to absorb shocks?\",\"answer\":\"Within the moderate rating, Bhutan is assessed as having limited capacity to absorb additional shocks, particularly export shocks.\"},{\"question\":\"Which liabilities are covered in the debt sustainability analysis?\",\"answer\":\"The analysis includes public and publicly-guaranteed (PPG) debt covering non-financial public sector entities and the central bank, while excluding special purpose vehicles tied to new hydropower projects under stated exclusion 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is Bhutan’s debt distress risk rated moderate despite threshold breaches?","Question",{"text":75,"@type":76},"Judgment is applied because hydropower loans have unique mitigating factors, including intergovernmental arrangements with the Government of India that cover financial and construction risks and include cost-plus electricity purchase terms.","Answer",{"name":78,"@type":73,"acceptedAnswer":79},"What explains Bhutan’s limited space to absorb shocks?",{"text":80,"@type":76},"Within the moderate rating, Bhutan is assessed as having limited capacity to absorb additional shocks, particularly export shocks.",{"name":82,"@type":73,"acceptedAnswer":83},"Which liabilities are covered in the debt sustainability analysis?",{"text":84,"@type":76},"The analysis includes public and publicly-guaranteed (PPG) debt covering non-financial public sector entities and the central bank, while excluding special purpose vehicles tied to new hydropower projects under stated exclusion 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