Nepal’s Public Debt Soars to Rs 26.11 Trillion, Burdening Citizens with Rs 85,000 Per Capita Debt

Nepal’s public debt has reached a staggering Rs 26.11 trillion (Rs 26,11,06 crore) as of mid-January (Magh) of the current fiscal year 2081-82, according to the latest report from the Public Debt Management Office (PDMO). This figure reflects an alarming increase of Rs 1.76 trillion (Rs 1,76,96 crore) since the start of the fiscal year, when the debt stood at Rs 24.34 trillion (Rs 24,34,09 crore). With the debt-to-GDP ratio climbing to 45.77%, the per capita debt burden has risen to approximately Rs 85,000, leaving citizens grappling with an economic reality far removed from promises of relief.

Escalating Debt and Economic Strain

The PDMO report reveals a near-even split between domestic and foreign debt, with external loans accounting for 50.87% (Rs 13.28 trillion or Rs 13,28,25 crore) and internal borrowing making up 49.13% (Rs 12.82 trillion or Rs 12,82,81 crore). A significant portion of the increase—Rs 36.59 crore—is attributed to exchange rate fluctuations, highlighting Nepal’s vulnerability to global currency shifts. Over the past four years, the debt has surged alongside the costs of federalism and ambitious budgets, outpacing revenue generation and pushing the debt-to-GDP ratio past 45%, a threshold that signals growing economic risk.

Historical data underscores the relentless rise: from Rs 6.97 trillion in 2073-74 (2016-17) to Rs 24.34 trillion in 2080-81 (2023-24), public debt has nearly quadrupled in less than a decade. The current fiscal year’s addition of Rs 1.76 trillion in just seven months suggests an accelerating trend, driven by a reliance on loans to fund recurrent expenditures and stalled development projects.

Inflation and Shrinking Opportunities

The Nepal Rastra Bank reports consumer inflation at 5.41% as of mid-January, with food and beverage inflation at 7.67% and non-food items at 4.19%. Specific categories like vegetables (28.52%), ghee and oil (10.67%), and pulses (9.48%) have seen sharp price hikes, exacerbating the cost-of-living crisis. Rural areas face a slightly higher inflation rate (5.68%) than urban zones (5.31%), with Koshi Province recording the highest at 6.73%. This inflation, coupled with a heavy reliance on imported goods, has eroded purchasing power, while productive sectors like agriculture and manufacturing languish, locking Nepal into a cycle of borrowing and spending without growth.

The article paints a grim picture of an economy where income-generating avenues are shrinking, and expenditure continues to balloon. The exodus of skilled labor abroad—often permanently—further depletes Nepal’s workforce, reducing domestic production and increasing dependence on imports. Meanwhile, the government’s failure to curb corruption and inefficiency has funneled borrowed funds into administrative costs rather than transformative infrastructure, leaving citizens to bear a double burden of debt and stagnation.

Government Inaction and Political Distraction

Critics argue that the government remains fixated on political power plays rather than addressing this crisis. The article suggests that leaders are more interested in “singing praises of power” than tackling the root causes of the debt spiral. With 60-65% of the budget consumed by recurrent expenses, ambitious development plans remain underfunded or incomplete, marred by delays, cost overruns, and graft. The lack of fiscal discipline—evident in weak revenue collection, unchecked customs evasion, and an outdated economic framework—has compounded the problem.

Nepal’s debt-financed model, while not unusual globally, lacks the productivity to justify it. Wealthier nations often sustain higher debt-to-GDP ratios (e.g., Japan at over 200%), but they offset this with robust economic output. In contrast, Nepal’s borrowed funds yield little return, with projects failing to deliver jobs or infrastructure at scale. The article warns that without a shift toward sustainable investments, the debt burden will only grow, potentially mirroring the crises of heavily indebted neighbors like Sri Lanka.

Interpretation: A Nation at a Crossroads

The Rs 85,000 per capita debt figure is more than a statistic—it’s a symbol of dashed hopes. Citizens awaiting relief find themselves in a state of “watching fruit in the sky while their eyes tire,” as the Nepali proverb goes: debt doesn’t shrink, incomes don’t rise, and daily life grows harder. The 45.77% debt-to-GDP ratio, while not yet at distress levels (the IMF deems 50-60% manageable for developing nations), signals a tipping point if trends persist. The Rs 36.59 crore added by currency depreciation alone underscores Nepal’s exposure to external shocks, a risk amplified by its trade deficit and remittance reliance.

The government’s inertia is stark. Rather than leveraging loans for hydropower, manufacturing, or export growth—sectors with high potential—it has prioritized short-term spending, leaving the economy vulnerable. Corruption and political instability, perennial issues, erode trust and efficiency, while the private sector remains sidelined, lacking incentives or guarantees to drive growth. The article’s call for “scientific balance” between income and expenditure is a plea for structural reform: diversify the economy, boost revenue, and prioritize capital projects over handouts.

A Warning and a Challenge

Nepal stands at a critical juncture. Public debt is a tool for development, not a sin—but its misuse is a crime against the future. The article warns of a “debt trap” akin to regional crises if corrective action falters. With foreign grants dwindling post-2026 (Nepal’s LDC graduation) and interest rates rising, the window for self-reliance narrows. The challenge isn’t merely reducing debt but ensuring it fuels growth—turning borrowed billions into tangible assets rather than a heavier yoke. Without this shift, Nepal risks a future where debt transcends whole numbers into an unmanageable abyss, a burden its people cannot bear.