Public Debt Rises by More Than Rs132 Billion in First Six Months of the Fiscal Year

Kathmandu — Nepal’s public debt has increased sharply in the first half of the current fiscal year, reflecting weak revenue performance, rising expenditure pressure, and the impact of a depreciating national currency. According to the latest monthly report of the Public Debt Management Office, public debt rose by Rs132.34 billion between mid-July and mid-January.

A major contributor to the rise in debt burden has been the weakening of the Nepali rupee against the US dollar. By mid-January, exchange rate fluctuations alone had added Rs70.68 billion to Nepal’s public debt liability. As Nepal must repay external loan principals in US dollars, a stronger dollar directly increases the country’s debt obligations in rupee terms. Nepal Rastra Bank data show that one US dollar stood at Rs145.76 on Tuesday.

Outstanding Public Debt Crosses Rs28 Trillion

By mid-January, Nepal’s total outstanding public debt reached Rs28.06 trillion, up from Rs26.74 trillion at the beginning of the fiscal year. Compared to the same period last fiscal year, when outstanding debt stood at Rs25.36 trillion, Nepal’s public debt has increased by Rs270 billion within a year.

Public debt now accounts for 45.95 percent of the country’s Gross Domestic Product (GDP). Of this, domestic debt constitutes 21.60 percent, while external debt accounts for 24.35 percent of GDP, indicating a growing reliance on foreign borrowing.

External Debt Dominates the Portfolio

As of mid-January, the government’s outstanding domestic debt stood at Rs13.19 trillion, while external debt reached Rs14.87 trillion. At the start of the fiscal year, domestic debt was Rs12.68 trillion and external debt Rs14.05 trillion.

The Public Debt Management Office reports that external loans now make up 53 percent of total public debt, while domestic borrowing accounts for the remaining 47 percent. The increasing share of external debt has heightened Nepal’s exposure to exchange rate risks.

Borrowing Falls Short of Annual Target

The government has set a target to raise Rs595 billion in public debt in the current fiscal year, including Rs362 billion in domestic borrowing and Rs233 billion in external loans. However, by mid-January, only Rs214.55 billion had been mobilized—just 36.02 percent of the annual target.

Domestic borrowing has performed relatively better, achieving 59.8 percent of its target, while external loan mobilization remains weak at 15.79 percent. During the review period, the government raised Rs177.76 billion in domestic debt and Rs36.89 billion in external debt.

Officials acknowledge that sluggish revenue collection has forced the government to depend increasingly on borrowing to manage routine expenditures and public spending commitments.

Debt Servicing Costs Rising Rapidly

Debt servicing costs continue to put pressure on public finances. For fiscal year 2082–83, the government allocated Rs411 billion for debt servicing. By mid-January, Rs187.12 billion—or 45.53 percent of the annual allocation—had already been spent. Debt servicing now amounts to 3.06 percent of GDP.

Over the past six months, the government reduced liabilities by repaying Rs155.13 billion in domestic debt and Rs31.99 billion in external debt. During this period, Rs152.89 billion was spent on principal repayments and Rs34.23 billion on interest payments.

Domestic debt servicing included Rs126.76 billion in principal repayments and Rs28.37 billion in interest, while external debt servicing involved Rs31.99 billion in principal repayments and Rs5.85 billion in interest payments.

Despite these repayments, the overall debt burden continued to rise, primarily due to currency depreciation. The Public Debt Management Office confirmed that exchange rate movements alone added Rs70.68 billion to external debt liabilities during the period.

Growing Fiscal Challenge

The latest figures underline Nepal’s mounting fiscal challenges. Weak revenue growth, rising debt servicing obligations, and vulnerability to external shocks—particularly exchange rate fluctuations—are tightening the government’s fiscal space. Economists warn that without stronger revenue mobilization and more efficient public spending, reliance on debt could further strain macroeconomic stability in the years ahead.