Mainly to pay installments for the loan taken to build the Tala hydropower project
Rupee Borrowings: Nine months after the government introduced a host of measures to rein in rupee outflows, including restricting import of vehicles and limiting individual rupee withdrawals, Rupee borrowings are at a high of INR 17.2B.
This is almost twice the cost of the delayed Dungsam project, the country’s biggest cement plant coming up in Nganglam.
The Rupee borrowings include INR 6B from the government of India’s (GoI) special credit facility, INR 2B from the Punjab national bank and the remaining INR 9.2B from the State Bank of India’s overdraft facility.
While borrowings from the GoI’s credit facility and PNB have remained the same as a month ago, Bhutan entered into new borrowings from the State Bank of India to pay off the loan repayment for the Tala hydropower project, which amounted to Rs 2.6B. This amount was paid on 15 December.
The SBI overdraft facility has a ceiling of Rs 10B, after which Bhutan will not be able to borrow anymore unless the limit is raised. As of today, the borrowing is INR 800M away from reaching the ceiling.
Central bank officials said the increased INR borrowings were mainly to pay the installments for the loan taken to build the 1020MW Tala hydropower project.
Tala was built at a cost of Nu 40B, of which 60 percent was loan availed by Bhutan. The project was commissioned in 2007, and the first annual installment of Nu 2.6B was paid in 2008. To liquidate the loan, Bhutan will have to pay Nu 2.6B annually until 2019.
The project earns INR 7B annually from sale of power to India.
Another reason for the increased borrowings was payments to expatriate construction workers, who will be returning home for the winter months.
The demand for rupee from the banks has also increased drastically, said central bank officials, and the requirements were mostly hydropower related.
Recently, the Bank of Bhutan put up a requisition to the central bank for Rs 286M. The amount was mostly meant for industrial imports. “We aren’t able to provide them the exact amount of rupees they demand,” said an official from the central bank’s foreign exchange department.
By Nidup Gyeltshen