Government debt reaches Rs. 2,433.23 billion by end of Fiscal Year 2023-24

KATHMANDU: As of the end of the fiscal year 2023/24, the total outstanding debt of the government has surged to Rs. 2,433.23 billion, according to a report released by the Public Debt Management Office under the Ministry of Finance. This marks a notable increase from the previous fiscal year, demonstrating the government’s growing reliance on both domestic and external borrowing.

Breakdown of Debt

Out of the total debt, external debt constitutes Rs. 1,252.33 billion, while domestic debt comprises Rs. 1,180.90 billion. This delineation shows a nearly equal split between external and internal sources of funding, with external debt accounting for 51.47% and domestic debt making up 48.53% of the total outstanding debt.

Annual Increase

The report highlights that the public debt has increased by Rs. 134.68 billion in the last fiscal year alone. By the end of the previous fiscal year 2022/23, the total public debt stood at Rs. 2,299.35 billion. The 5.53% increase in the total outstanding debt during the fiscal year 2023/24 comprises a 7% rise in external debt and a 4.5% rise in domestic debt.

Additional Borrowing and Repayment

In the last fiscal year, the government mobilized an additional Rs. 358.02 billion in loans. This includes Rs. 234.42 billion from domestic sources and Rs. 123.60 billion from external sources. Despite the increased borrowing, the government only managed to collect 79% of its debt target.

For the current fiscal year, the government has set an ambitious target of raising Rs. 452.75 billion to address the budget deficit. This target includes Rs. 240 billion through domestic borrowing and Rs. 212.75 billion through external loans.

In terms of repayment, the government has paid Rs. 305.37 billion towards principal payments of these loans. Of this amount, Rs. 255.25 billion was for domestic loans, and Rs. 49.99 billion was for external loans. The report also notes that the government spent 92.54% of the total budget allocated for principal and interest payments in the last fiscal year.

Budget Allocation and Debt Management

The government had allocated Rs. 330 billion for financial management in the last fiscal year. Domestic debt mainly comprises short-term and long-term securities issued in the domestic market, as well as loans borrowed from the central bank.

Debt-to-GDP Ratio

As of mid-July 2024, the total debt-to-GDP ratio stands at 42.65%. This includes an external debt-to-GDP ratio of 21.95% and a domestic debt-to-GDP ratio of 20.70%. Comparatively, at the end of the fiscal year 2022/23, the debt-to-GDP ratio was slightly higher at 42.73%, with external debt at 21.75% and domestic debt at 20.98%.

Sources of External Debt

The International Development Association (IDA) holds the largest share of the government’s outstanding external debt at 48.93%. This is followed by the Asian Development Bank (ADB) with a 32.54% share. These multilateral agencies together account for 89.07% of the external debt, while bilateral agencies hold the remaining 10.93%.

Implications and Future Outlook

The growing debt levels underscore the challenges the government faces in balancing fiscal management and economic growth. The reliance on borrowing, both domestically and externally, indicates a need for strategic financial planning to manage the debt burden effectively.

The government’s ability to meet its ambitious borrowing targets for the current fiscal year will be crucial in determining its financial health. Ensuring sustainable debt levels and efficient utilization of borrowed funds will be key to maintaining economic stability and fostering growth.