Nepal’s Public Debt Increases by Rs 69.32 Billion in Two Months

Nepal’s public debt stood at Rs 27.43 trillion as of mid-September, marking 44.92% of the country’s GDP, according to the Public Debt Management Office. This represents an increase of Rs 69.32 billion compared to the end of Ashad (mid-July), when the debt was Rs 26.74 trillion.

Breakdown of Public Debt

Of the total debt, domestic debt amounts to Rs 12.82 trillion (20.99% of GDP), while external debt is Rs 14.62 trillion (23.93% of GDP). In the first two months of the current fiscal year (Shrawan and Bhadra), the government borrowed Rs 79.15 billion, of which Rs 78.67 billion was spent on principal and interest payments.

• Principal payments: Rs 65.07 billion
• Interest payments: Rs 13.60 billion

Interest payments on public debt are counted as part of the government’s recurrent expenditure. Currency exchange rate fluctuations added Rs 55.23 billion to the total debt burden over the two months, leading to the Rs 69.32 billion net increase.

Debt Collection and Service

The government’s total public debt collection in the first two months represents 13.29% of the annual target:

• Domestic debt: Rs 70 billion (19.34% of annual target)
• External debt: Rs 9.15 billion (3.92% of annual target)

The government has set an annual borrowing target of Rs 5.95 trillion for the current fiscal year. While domestic borrowing performed well, external borrowing remained relatively low.

During this period, Rs 78.67 billion was spent on debt servicing (principal and interest), which accounts for 19.14% of the annual target. Of this:

• Domestic debt servicing: Rs 67.67 billion (19.70%)
• External debt servicing: Rs 10.99 billion (16.31%)

The government allocated Rs 4.11 trillion for debt service under the fiscal management budget this year.

Impact of Currency Exchange Rate

The depreciation of the Nepali rupee against the US dollar and other foreign currencies added an additional Rs 55.23 billion to Nepal’s public debt in Bhadra. A weaker rupee increases debt burden, while a stronger rupee reduces it.

From Ashad 2081 to Ashad 2082, the Nepali rupee’s depreciation contributed Rs 66.93 billion to the rising debt. In the first month of this fiscal year, the rupee devalued by 2% against the US dollar, compared to 0.5% in the same period last year.

Over the past seven fiscal years, currency fluctuations caused losses in four years and gains in the remaining years.

Debt-to-GDP and Per Capita Impact

The total public debt as of mid-September represents 44.92% of Nepal’s projected GDP of Rs 61.07 trillion. Of this:

• External debt: 53.27%
• Domestic debt: 46.73%

Based on Nepal’s population of 29.16 million (National Census 2078), each citizen’s share of public debt amounts to approximately Rs 94,000.

Economic Implications

Economists warn that the continuously rising public debt could pose future risks. Between FY 2080/81 and FY 2081/82, allocations for fiscal management caused a surge in capital expenditure, fueled by both domestic and foreign borrowing.

Rising debt obligations, combined with gaps between capital expenditure and budget allocations, could limit the government’s future investment capacity and increase the risk of financial imbalance. However, in the current fiscal year, allocations for capital expenditure already exceed the budgeted fiscal management funds.