Public Debt of Nepal’s Government Rises to Rs. 26.11 Kharba

February 23, 2025 | Investopaper

Nepal’s public debt has surpassed 45 percent of the country’s Gross Domestic Product (GDP), a concerning data according to a report from the Public Debt Management Office. As of Magh’s end 2081 BS, the total government debt reached approximately Rs. 26.11 Kharba, marking an increase of Rs. 1.76 Kharba since the beginning of the current fiscal year. At the start of this fiscal year, public debt stood at Rs. 24.34 Kharba, indicating a significant rise in borrowing over just a few months. The report highlights that the current public debt-to-GDP ratio is approximately 45.77 percent, with foreign debt constituting 50.87 percent and domestic debt making up 49.13 percent of the total.

The increase in debt has been exacerbated by changes in exchange rates, which alone accounted for an additional Rs. 36.59 billion in liabilities during this period. The government initially aimed to raise Rs. 5.47 Kharba in public debt for the current fiscal year, and so far, it has secured about Rs. 2.91 Kharba, which represents 53.12 percent of its annual target. The government plans to raise Rs. 3.30 Kharba in domestic loans and Rs. 2.17 Kharba in external loans this fiscal year, with current achievements standing at Rs. 2.29 Kharba and Rs. 61.42 Kharba, respectively.

To manage its debt obligations, the government has allocated a budget of Rs.4.02 Kharba for interest payments this fiscal year. Over the past seven months, it has already paid Rs. 1.78 Kharba in interest, which equates to about 3.31 percent of the total GDP. This rising trend in public debt and interest payments raises concerns about fiscal sustainability and economic stability, as experts warn that excessive borrowing could lead to adverse effects on future generations and hinder economic growth if not managed prudently.