KATHMANDU: Nepal’s liability to pay public debt surged by Rs 41.11 billion last month, pushing the country’s total debt liability to Rs 2.472 trillion, according to the latest data from the Public Debt Management Office (PDMO).
In the period between mid-July and mid-August, the government secured loans totaling Rs 43.59 billion. Of this, Rs 40 billion was raised through domestic borrowing, while the remaining Rs 3.59 billion came from external sources.
During the same period, the government managed to repay Rs 19.27 billion in principal and interest for its past debts. This included Rs 17 billion in domestic debt and Rs 2.27 billion in external loans. However, despite these repayments, the depreciation of the Nepali currency against the US dollar added an extra burden of Rs 16.79 billion to the government’s debt due to the increased cost of foreign loans.
At the end of the fiscal year 2023/24, Nepal’s public debt stood at Rs 2.431 trillion, with Rs 1.250 trillion in external loans and Rs 1.180 trillion in domestic loans. The latest figures indicate that Nepal’s debt now amounts to 43.34 percent of its gross domestic product (GDP), with external loans comprising 22.24 percent of the total debt.
Economists have raised concerns over the sharp increase in public debt, which has doubled over the past five years. The cumulative internal and external debts were Rs 1.048 trillion at the end of FY 2018/19, but this figure has more than doubled to Rs 2.4344 trillion by the end of FY 2023/24. The growing debt burden, largely used to cover administrative costs, has been termed “alarming” by experts.
Despite these concerns, the government maintains that the current level of debt is still manageable. However, Finance Minister Bishnu Prasad Paudel, addressing the House of Representatives on Wednesday, stressed the need for careful consideration in the future, emphasizing that borrowing should be directed towards projects with high returns.
For the current fiscal year, the government has set a borrowing target of Rs 547 billion, with Rs 330 billion expected to come from domestic sources and Rs 217 billion from external loans. However, given the country’s rising debt levels and ongoing challenges in revenue collection, meeting these targets without further straining the economy could prove difficult.
This increase in public debt is a pressing issue, as the nation continues to grapple with fiscal challenges, making it imperative for the government to address the rising liabilities effectively. The situation underscores the importance of sustainable fiscal management in maintaining economic stability in the years ahead.