National workshop on Capital Market Development in Bhutan
Bhutan is increasingly facing significant resource constraints to finance its socio-economic development in the short and medium term with hydropower resources kicking in much later due to prolonged delays in the commissioning of its large hydropower projects, namely Punatsangchhu I (1200 MW) and II (1020 MW). This is further constrained by the prospect of graduation from LDC status in 2024-25 that will significantly reduce the availability of concessional financing that so far has been critical in addressing resource gaps for structural transformation. Moreover, development assistance from its largest partner India for the 12th Plan period (2018-2023) has been maintained at the same level as in the eleventh plan period.
Assistance from other development partners will also likely decline as Bhutan’s per capita income and other social indicators have long crossed thresholds of a low-income and low human development state. The Royal Government of Bhutan (RGoB) issuance of treasury bills and short- term loans from the banks have also come under recent scrutiny as the issuance of T-Bills and short-term debts heightens the related risks of constraining the development of capital markets in the country, volatility in interest rates, asset-liability mismatch, liquidity risks, and limited option to finance specific needs.
To address this resource gaps, the Government has identified the need to look at “innovative financing mechanisms” to help address the resource gaps. Sovereign bond should enable the government to fund public sector borrowing requirements at competitive cost. In 2017, RGOB has requested ESCAP to provide technical assistance in developing sovereign bond market. ESCAP has since been actively engaged in assisting RGoB in developing capital market through various stakeholders’ consultations, capacity building workshops and research product. As a part of ESCAP’s technical assistance to Bhutan, this national workshop aims to engage with the Ministry of Finance and various Government agencies and key stakeholders to help facilitate an issuance of Bhutan’s first sovereign bonds. It will emphasize experiential learning and exchange of information with experts, institutional investors, and private sector investors.