Nepal’s public debt has climbed to Rs 2.622 trillion by mid-May, fueled by unchecked spending in unproductive sectors and growing reliance on borrowings to meet fiscal obligations, according to the Public Debt Management Office (PDMO).
In the first ten months of the current fiscal year 2024/25, the country’s debt burden rose by Rs 188.30 billion. Of this, Rs 48.19 billion was added solely due to the depreciation of the Nepali rupee against foreign currencies.
The PDMO data shows that domestic borrowings account for Rs 1.266 trillion of the total debt, while foreign borrowings stand at Rs 1.355 trillion. Public debt now represents 42.94 percent of Nepal’s gross domestic product (GDP), with internal and external loans accounting for 22.20 percent and 23.76 percent of GDP, respectively.
Economist and former Nepal Rastra Bank Governor Dipendra Bahadur Chhetri attributed the surge in public debt to the government’s failure to implement austerity measures effectively. He stressed the need to curb unnecessary expenditures, such as foreign visits, and prioritize only those development projects that help reduce the country’s financial burden.
Due to the mounting debt, the government has had to allocate a significant portion of its budget to debt servicing, limiting resources for development projects. By mid-May, Rs 264.28 billion out of the Rs 367.28 billion allocated for debt servicing had already been spent.
Meanwhile, revenue shortfalls and rising expenditures have forced the government to cover immediate liabilities through borrowings. In the ten-month review period, Nepal faced a budget deficit of Rs 234.57 billion, with total spending reaching Rs 1.157 trillion against revenue of just Rs 922.43 billion.
In response to the fiscal strain, the government has slashed grants to sub-national governments by one-third of the amount announced in the FY 2024/25 budget.
Out of the targeted Rs 547 billion in public debt mobilization for the current fiscal year, the government has already utilized 71.45 percent, raising Rs 301.14 billion from domestic sources and Rs 89.68 billion from foreign loans.
