Nepal’s Public Debt Reaches Rs 2,500 Billion, Interest Payments Surpass Development Budget

Nepal’s public debt has surged to approximately Rs 2,500 billion, with interest payments now exceeding the annual budget allocated for development projects.

A report released by the Public Debt Management Office, covering data up to mid-December, reveals that the total public debt stands at Rs 2,492.91 billion, up from Rs 2,434 billion at the start of the current fiscal year. This increase of Rs 58.31 billion over the past five months accounts for 43.69% of the country’s Gross Domestic Product (GDP).

In the month of Mangsir (November-December), the government made a payment of Rs 58.24 billion towards servicing its debt obligations, while receiving loans worth Rs 21.23 billion. Fluctuations in the exchange rate also led to a reduction in debt obligations by Rs 25.64 billion as of December 15, compared to the previous month.

The report highlights that Nepal’s international debt obligations amount to Rs 1,217.66 billion, or 21.34% of the total public debt, while external debt obligations stand at Rs 1,274.75 billion, accounting for 22.35% of the total.

For the current fiscal year, the government had set a target to mobilize Rs 547 billion in loans. As of December 15, it had mobilized Rs 192.29 billion, or 35.15% of the target. The government has raised Rs 164 billion in internal loans, which is 49.7% of its annual target, and Rs 28.29 billion in external loans, or 13.04% of its annual target.

To service the public debt, the government allocated Rs 402 billion for the current fiscal year. As of December 15, Rs 170.49 billion has already been paid towards the principal and interest, representing 2.99% of the GDP.

Alarmingly, the government’s expenditure for servicing public debt now exceeds the allocation for development projects. While Rs 352.35 billion was earmarked for capital expenditure this fiscal year, Rs 402 billion has been set aside to pay the principal and interest on public loans. By December 15, the debt service expenditure is approximately 4.5 times greater than the capital expenditure, with the Comptroller General’s Office reporting that capital expenditure has only reached Rs 40.8 billion.

The rising public debt and its associated interest payments are raising concerns about the sustainability of government finances and the ability to fund development projects in the coming years.