Nepal’s total public debt has reached Rs 2.961 trillion during the first 11 months of the current fiscal year 2025/26, equivalent to 44.87 percent of the country’s gross domestic product (GDP), according to the Public Debt Management Office (PDMO).
Between mid-July 2025 and mid-June 2026, the country’s debt stock increased by Rs 287.14 billion. Of the total outstanding debt, foreign loans account for 53.49 percent, while domestic debt constitutes 46.51 percent.
Although the government maintains that borrowed funds are used for development activities, a significant portion has been utilized to finance budget deficits and meet growing debt repayment obligations. For the current fiscal year, the government targeted debt mobilization of Rs 595.66 billion, but had borrowed only Rs 418.12 billion, or 70.2 percent of the annual target, by mid-June.
Domestic borrowing has emerged as the primary source of financing, with mobilization reaching 93.55 percent of the target. In contrast, foreign borrowing achieved only 34.01 percent of its target. Finance Ministry officials attribute the weak performance of external borrowing to lengthy loan agreement procedures, delays in project implementation, and slow disbursement by development partners, forcing the government to rely more heavily on domestic sources.
Debt servicing costs have also increased substantially. The government allocated Rs 411.1 billion for principal and interest payments in the current fiscal year, of which Rs 351.74 billion, or 85.58 percent, had already been spent by mid-June. Debt servicing alone now amounts to 5.33 percent of Nepal’s GDP.
According to the PDMO, the depreciation of the Nepali rupee against the US dollar has further increased the debt burden. During the 11-month period, net debt mobilization amounted to Rs 133.67 billion, accounting for only 46.55 percent of the rise in total debt. The remaining 53.45 percent increase was attributed to foreign exchange fluctuations.
Economists have warned that the rising debt burden could hamper development efforts, as a growing share of government resources is being diverted toward debt repayment rather than investment in infrastructure and productive sectors.
