Govt debt arrear surpassed. Rs 2858 billion

Kathmandu / Feb 27: The government’s debt arrear surpassed Rs 2858 billion. According to a public debt report until mid-Jan published by the Public Debt Management Office, the total public debt increased by Rs 184.93 billion to Rs 2858.97 billion untill mid-Jan which was Rs 2674.04 billion in the Mid-July.

The Public Debt Management Office informed that the total debt now comprised of 46.81 per cent of the current gross domestic product (GDP).

Out of the total debt arrear, the internal debt recorded Rs 1349.13 billion and the external debt recorded Rs. 1509.84 billion.

The government has received a debt amounted Rs 255.84 billion this fiscal year (FY) thus far while the its target is Rs 595 billion.

During the review period, the Nepali currency depreciated by about Rs 8 against the US dollar—from Rs 137.35 per dollar in mid-July 2025 to Rs 145.03 per dollar by mid-February, according to Nepal Rastra Bank. Since a substantial portion of Nepal’s external debt is denominated in US dollars or the International Monetary Fund’s Special Drawing Rights (SDRs), exchange rate fluctuations directly affect the total debt burden.

At the start of the fiscal year in mid-July 2025, public debt stood at Rs 2.674 trillion. The current figure reflects a steady upward trend, with Rs 52 billion added in the past month alone, up from Rs 2.806 trillion in mid-January.

External loans now total Rs 1.509 trillion, accounting for 52.81 percent of the public debt, while domestic borrowing stands at Rs 1.349 trillion, or 47.19 percent. Although most foreign loans are concessional—carrying interest rates of less than one percent annually—the growing scale of debt and associated currency risks remain pressing concerns.

The government typically uses public borrowing to boost economic activity, manage inflation, and fund infrastructure development. However, with revenue collections consistently falling short of covering recurrent expenditures in recent years, borrowing has increasingly become a structural necessity rather than a counter-cyclical measure.

A prolonged economic slowdown has further constrained revenue generation. Over the past two fiscal years alone, public debt has increased by more than Rs 150 billion, rising from Rs 2.434 trillion in FY 2023/24.

Through the annual budget, the government has set a target to raise Rs 595 billion in public debt in the current fiscal year. As of mid-February, 42.89 percent of that target has been met.

With debt approaching half of Nepal’s GDP, the trend raises serious questions about fiscal sustainability, vulnerability to exchange rate volatility, and the government’s ability to fund development without deepening long-term liabilities. RSS