IFC Makes First-Ever Bhutan Infrastructure Investment with $20M Power Project

In a landmark step for Bhutan’s infrastructure development, the International Finance Corporation (IFC), a member of the World Bank Group, has announced its first-ever investment in the country’s infrastructure sector. The US$20 million financing package, linked to the Bhutanese Ngultrum (BTN), will support Bhutan Power Corporation Limited (BPC) in modernizing its national power distribution system and enhancing electricity reliability.

The initiative, supported by the International Development Association’s (IDA) Private Sector Window, Local Currency Facility, not only strengthens Bhutan’s energy sector but also introduces a new financing model that could transform the local market.

A Pioneering Transaction with Three Firsts

This transaction marks three historic milestones for Bhutan and IFC:

1. First Bhutanese Ngultrum-linked loan – expanding access to financing tied to the local currency, reducing foreign exchange risks.

2. IFC’s debut infrastructure investment in Bhutan – opening a pathway for further international development financing.

3. First-ever State-Owned Enterprise (SOE) investment in Asia’s power distribution sector – setting a precedent for regional infrastructure financing.

Modernizing Bhutan’s Electricity Grid

Bhutan Power Corporation’s CEO, Sonam Tobjey, emphasized the significance of the deal:

“This partnership with IFC represents a significant milestone for BPC, as it diversifies our financing options and marks our first international commercial loan. The Panbang GIS substation and grid modernization will enhance electricity reliability, reduce outages, and support socio-economic growth in the country. More than an infrastructure upgrade, it is an investment in Bhutan’s future.”

The project will expand BPC’s capacity to deliver stable, high-quality electricity to households, businesses, and industries, particularly in rural areas where outages are still common.

Enabling Regulatory Reforms

The financing was made possible following Bhutan’s issuance of revised External Commercial Borrowing (ECB) Guidelines on May 1, 2025, which improved the regulatory framework for foreign lending. The move reflects the government’s commitment to building a more robust financial ecosystem to attract international capital.

Bridging Bhutan’s Infrastructure Gap

“Rural Bhutan still faces power outages, disrupting daily life and business. Addressing this challenge requires strong investment in sustainable infrastructure,” said Imad N. Fakhoury, IFC Regional Director for South Asia.

He added that the investment aligns with the government’s vision of universal electricity access, bridging a financing gap in the domestic market while enabling development that could:

• Boost economic growth.

• Attract industrial investment.

• Create new jobs.

• Improve quality of life across Bhutan.

Strategic Partnerships for Sustainability

The agreement was signed on behalf of IFC by Vikram Kumar, Director & Regional Head of Industry, Infrastructure and Natural Resources, Asia Pacific. He underscored the importance of international collaboration in driving sustainable infrastructure development in Bhutan and the Asia Pacific.

Beyond financing, the IFC-BPC partnership includes technical support to strengthen environmental, social, and governance (ESG) standards and project management practices. Aligning with IFC Performance Standards will position BPC to access more funding from development finance institutions and international agencies, diversifying its capital sources.

Aligned with Bhutan’s Development Priorities

The initiative complements the World Bank Group’s Country Partnership Framework (CPF) FY2025–29, which prioritizes:

• Climate resilience.

• Sustainable infrastructure.

• Improved connectivity and inclusive growth.

By modernizing Bhutan’s energy infrastructure, the project reinforces the country’s reputation as a leader in hydropower development while strengthening its domestic power distribution system to support future industrial and economic expansion.

A Model for Future Financing

This investment is more than an upgrade to Bhutan’s grid — it represents a financial innovation that could transform how infrastructure projects are funded in small economies with limited capital markets. By linking the loan to the Bhutanese Ngultrum, IFC reduces foreign exchange risks, making long-term financing more sustainable.

As Bhutan looks to the future, this pioneering partnership between IFC and BPC demonstrates how strategic investment, regulatory reform, and international cooperation can come together to power sustainable development.