It is prudent to enact a public debt management act: PAC
The Chairperson of the Public Accounts Committee (PAC) and member of the Parliament from Nganglam Choida Jamtsho presented the report of the Royal Audit Authority (RAA) on public debt management to the joint sitting of Parliament. The report was reviewed by the PAC considering significant audit findings.
It is reported that the public debt projections indicated increasing trend as of now. It came by the end of the period, the public debt figure projected to be Nu 258,796.410m and debt to GDP ratio will be over 120 percent.
Public Accounts Committee (PAC) reported the Indian Rupee debt will constitute over 73 percent of the total public debt and also the projections in public debt figures during the period along with the GDP.
Out of the public debt projections for the period 2013-14 to 2017-18, the current scenario by the end of March 2015 the public debt projected to the nominal GDP of Nu 124,534.74 million, the total public debt to Nu 118,546.62m (95.20% of GDP), external debt of Nu 114,071.32m (91.60% of GDP), Domestic debt of Nu 4,475.30m, hydro power debt to Nu 81,580.38m (65.5% of GDP) with the rupee debt Nu 78,148.22m (62.80% of GDP) according to the report of the Public Accounts Committee (PAC) so far.
PAC comments as per the current status report on implementation of the recommendations of the Royal Audit Authority (RAA), the Ministry of Finance (MoF) has agreed on all 33 recommendations and is currently working on them to resolve the issues raised in the audit report.
To the review on PAC’s audit report on public debt situation in Bhutan, the RAA had conducted a review public debt situation in three plan periods, the first one 9th Five Year Plan (200304/2007-08), the second 10th FYP (2008-09/201213) and projected 11th FYP (2013-14/2017-18). The total debt stock including various govern- ment guarantees stood at Nu 97,094.12m as of 30th June 2013.
It is said the MoF has drafted a Public Debt Policy in collaboration with Ministry of Economic Affairs, Royal Monetary Authority, Gross National Happiness Commission and National Statistical Bureau which seeks to address majority of the recommendations made by RAA including the debt ceiling.
PAC comments that there are different institutions managing different loans availed or guaranteed by the government in-order to harmonize the existing laws; Finance Ministry is holding discussions with the different authorities.
The committee commented the hydro power debt may be considered as self- liquidating as indicated in the International Monetary Fund and World Bank Report. The hydro power debt shows an increasing trend due to change in funding pattern.
As Bhutan now ranks middle income country from low income country, henceforth there will be less flow of aid from the developed countries and loans would be more on stringent terms. Against this backdrop, the increasing trend in the non-hydro debt without a commensurate increase in domestic revenue is a concern, the committee has added.
They also commented that most of the growth is based on loans and grants, rather being financed through savings and revenue generations.
However, PAC recommends the MoF and relevant agencies to implement the recommendations made by RAA on a priority basis and submit an Action Taken Report to the PAC.
Apart from the recommendations made by the RAA, PAC recommends that it would be prudent to enact a public debt management act that will enhance the management of debt and confer legal authority to the public debt policy, with the increasing non-hydro debt; there is a need to diversify the revenue base.
They have also a recommendation to intensify efforts to increase national savings to finance growth and reduce the dependence on grants and loan. PAC supports the up gradation of the Debt Management Division to a department with the requisite technical expertise in order to consolidate all the debt related functions which are presently fragmented.
The report also indicated that PAC supports the up -gradation of the Debt Management Division to a Department with the requisite technical expertise.
The joint sitting will deliberate on the report tomorrow.