Nepal’s Public Debt Nears Rs 30 Trillion as Borrowing Pressure and Debt Servicing Costs Rise

Nepal’s total public debt has climbed close to the Rs 30 trillion mark, reflecting the growing fiscal pressure facing the government amid weak revenue growth, rising expenditure obligations and increasing dependence on borrowing to manage the economy. According to the Public Debt Management Office, the country’s total public debt reached Rs 29.75 trillion by the end of Baisakh in the current fiscal year 2082/83.

The latest figures show that public debt expanded significantly within just ten months of the fiscal year. During the review period, Nepal added approximately Rs 532.91 billion in new debt liabilities. Although the government repaid Rs 231.92 billion in principal during the same period, the net increase in public debt still stood at more than Rs 300 billion. The numbers highlight how fresh borrowing continues to outpace repayment, pushing the country’s overall debt burden steadily upward.

At the end of the previous fiscal year, Nepal’s total public debt stood at Rs 26.74 trillion. Within less than a year, the debt stock has moved sharply closer to the Rs 30 trillion threshold, underlining the rapid pace at which government liabilities are expanding. Economists say the trend reflects deeper structural weaknesses in Nepal’s fiscal system, where expenditure commitments continue rising while domestic revenue generation remains relatively weak.

The debt composition also shows growing dependence on both domestic and external borrowing. By the end of Baisakh, internal debt had reached Rs 13.81 trillion, while external debt stood at Rs 15.93 trillion. The external debt component remains slightly larger, making Nepal increasingly vulnerable to exchange rate fluctuations and external financial conditions.

Officials say the strengthening of the US dollar during the current fiscal year has added further pressure to Nepal’s debt obligations. According to the office, exchange rate fluctuations alone increased Nepal’s external debt liabilities by approximately Rs 167.75 billion. The data indicate that even without taking new loans, currency depreciation can substantially increase the burden of foreign-denominated debt for countries like Nepal that rely heavily on external borrowing.

Analysts believe this exchange-rate risk is becoming one of the most serious long-term challenges for Nepal’s debt management strategy. Since a large portion of Nepal’s foreign debt is denominated in US dollars and other international currencies, any weakening of the Nepali rupee automatically raises repayment costs in local currency terms. At a time when global interest rates remain relatively elevated and external financing conditions are tightening, managing foreign debt exposure is becoming increasingly difficult for developing economies.

Government borrowing activity also remained high throughout the fiscal year. By the end of Baisakh, the government had mobilized Rs 365.16 billion in public debt. Of this amount, Rs 298.66 billion came from domestic borrowing while Rs 66.49 billion was mobilized through external loans. The figures suggest the government is relying more heavily on domestic debt markets to finance budgetary needs, partly because foreign loan disbursement has remained slower than expected.

Meanwhile, debt servicing costs are emerging as another major burden on the national budget. Within the first ten months of the fiscal year alone, the government spent Rs 292.52 billion on principal and interest payments. Out of this amount, Rs 231.92 billion was used for principal repayment while Rs 60.59 billion went toward interest payments.

Internal debt servicing accounted for the largest share of repayments. The government paid Rs 185.66 billion in principal and Rs 50.52 billion in interest on domestic debt alone. External debt servicing, meanwhile, amounted to Rs 46.25 billion in principal repayment and Rs 10.06 billion in interest payments. Economists warn that rising debt servicing obligations reduce the government’s fiscal space for productive spending on infrastructure, social services and development programs.

The rapid growth in Nepal’s debt stock over recent years has become particularly striking. According to Ministry of Finance data, the country’s total public debt has nearly doubled in the past seven years. In fiscal year 2076/77, Nepal’s public debt stood at Rs 14.33 trillion. Since then, rising development expenditure, post-pandemic fiscal expansion, infrastructure financing needs and weak domestic revenue performance have collectively pushed debt levels sharply higher.

Despite the rising debt burden, government officials argue that Nepal’s debt-to-GDP ratio remains within internationally manageable levels. However, experts increasingly caution that sustainability concerns should not be judged solely by debt size. They argue that Nepal’s real challenge lies in the productivity and efficiency of borrowed funds. Questions are growing over whether public borrowing is generating sufficient economic returns capable of supporting future repayment obligations.

Critics also point out that capital expenditure implementation remains weak despite rising borrowing. Large portions of development budgets often remain unspent or are utilized inefficiently, while recurrent expenditure continues expanding. This has intensified concerns that Nepal may gradually be entering a cycle where borrowing is increasingly used to manage fiscal pressure rather than generate long-term economic productivity.

The debate surrounding Nepal’s rising debt is also becoming politically sensitive as the country simultaneously faces pressure to improve governance, strengthen public financial management and restore investor confidence. International financial institutions and credit observers are expected to closely monitor Nepal’s debt trajectory, especially at a time when the country is also trying to improve its standing in global financial governance frameworks linked to anti-money laundering and fiscal transparency.