19th April 2025, Kathmandu
Nepal’s government has accumulated NPR 366 billion in debt in the first nine months of the current fiscal year 2081/82, bringing the total public debt to NPR 2.67 trillion.
Rising Nepal Government Debt
This increase follows a steady rise in borrowing, with the government adding NPR 233.17 billion to its debt since the start of the fiscal year.
Debt Increase and Borrowing Target
At the beginning of fiscal year 2081/82, the government’s total public debt stood at NPR 2.43 trillion. By the end of Chait (mid-April), it had climbed to NPR 2.67 trillion. The Public Debt Management Office (PDMO) confirmed that foreign debt makes up 51.19% of the total debt, while domestic debt accounts for 48.81%.
For the fiscal year, the government targeted raising NPR 547 billion in debt. By mid-April, it had already raised NPR 366.69 billion, reaching about 67% of its borrowing goal. Domestic debt has surpassed expectations, accounting for 88.22% of the target, while foreign debt achieved 34.54% of the set goal.
Rising Debt Servicing Costs
As public debt rises, so does the cost of servicing it. By mid-April, the government had already spent NPR 252.48 billion on debt servicing, nearly 63% of the annual budget for this purpose. The total debt servicing cost is expected to reach 4.43% of GDP by the end of the fiscal year.
The government allocated NPR 402.85 billion for debt servicing this year. This includes payments for both the principal and interest on loans. Of the amount spent so far, NPR 212.93 billion went toward domestic debt repayment, with NPR 170.9 billion covering principal and NPR 42.84 billion paying interest. On foreign debt, NPR 39.43 billion was allocated for servicing, with NPR 32.93 billion for principal repayment and NPR 6.1 billion for interest.
Impact of Currency Fluctuations
Currency fluctuations have added pressure to Nepal’s foreign debt obligations. By mid-April, the changes in foreign exchange rates had increased the foreign debt liability by NPR 7.09 billion. Nepal borrows in five currencies under the Special Drawing Rights (SDR) framework, including the US Dollar, the Euro, the British Pound, the Chinese Yuan, and the Japanese Yen. The depreciation of these currencies has led to an increase in the total foreign debt.
Economic Implications
The rise in both borrowing and debt servicing costs poses a challenge for the Nepalese economy. The government’s ability to manage public debt effectively is crucial to maintaining economic stability. The government has already borrowed a significant portion of its target for the fiscal year. However, the growing debt servicing costs could strain the national budget in the coming months.
Conclusion
Nepal’s public debt has seen a sharp increase, with the government raising NPR 366 billion in just nine months. The growing debt and the rising costs of servicing it highlight the need for careful financial management.
Foreign debt, which constitutes a significant portion of the total debt, has been impacted by currency fluctuations, further adding to the financial burden. The government’s focus must remain on controlling debt growth and managing its repayment to ensure sustainable economic development in the future.
For more: Rising Nepal Government Debt