Japan Offers Loans for Hydropower Development in Bhutan

• Japan provides up to 13.7 billion yen in loans for Bhutan’s hydropower plans.
• The loan agreement was signed by Japanese and Bhutanese ambassadors in New Delhi.
• Three plants will be constructed, with completion targeted for 2029.
• Hydro-energy accounts for 40 percent of Bhutan’s annual exports during rainy seasons.
• The project aims for a stable energy supply and supports economic growth in Bhutan.

Japan’s financial support for Bhutan’s hydropower sector

Japan is stepping up its engagement with Bhutan by extending loans that are set to reach up to 13.7 billion yen, which translates to roughly $90 million. This funding will be directed toward the construction of hydropower plants in Bhutan, an important move aimed at strengthening ties between the two nations. The signing of the loan agreement took place in New Delhi in February, involving Japanese Ambassador to Bhutan Keiichi Ono and Bhutanese Ambassador Vetsop Namgyel, according to the Foreign Ministry.

Economic Potential of Hydropower for Bhutan

The hydropower project will feature three plants located strategically in Bhutan—one situated in Samdrup Jongkhar and the other two in Samtse—both of which are adjacent to India. Construction is anticipated to commence in May with a completion target set for 2029. It’s worth mentioning that Bhutan’s economy heavily relies on the export of hydro-energy, particularly during the monsoon months from June to October, which contributes roughly 40 percent of its annual export revenues.

Long-term goals of energy stability and development

Japan’s contribution aims not just at supporting a stable energy supply for Bhutan but also at bolstering power exports during the wet season. The project includes a “storage hydropower” facility designed to maintain a reservoir for regulating electricity generation, especially needed during dry spells, as Bhutan faces increasing energy demands alongside economic growth. Additionally, Japan is committed to aiding Bhutan in its goals for economic and social development, as well as promoting decarbonization in the Southwest Asian region.

In summary, Japan’s commitment to providing substantial loans for hydropower in Bhutan marks a significant step in deepening the bilateral relationship. These advancements are vital for Bhutan’s energy independence and export strategies, contributing to both nations’ broader objectives of economic growth and environmental sustainability. The planned construction of energy facilities will be closely watched as it unfolds over the next several years.

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