The NEPSE Journal
Market commentary, data deep-dives, and trading notes from the NEPSE Trading desk.
Nepal’s domestic debt has hit an all-time high of Rs. 1.27 trillion, fueled by heavy issuance of development bonds and reduced short-term borrowing. While it strengthens liquidity management, sustainability concerns loom as the government increasingly relies on domestic banks for funding.
Commercial banks’ exposure to government debt has crossed Rs. 1.02 trillion, reflecting growing fiscal reliance on banks. While it supports short-term financing stability, it poses long-term risks to credit growth and market balance.
Nepal Rastra Bank’s domestic debt holdings have dropped to Rs. 12 billion, the lowest in recent memory, reflecting tighter fiscal discipline and a move toward market-driven borrowing.
Non-bank institutions added Rs. 19.4 billion in government debt holdings in one month, signaling a healthy diversification of Nepal’s debt market and reduced reliance on banks.
Foreign Employment Bonds remain unchanged at Rs. 330 million, signaling low migrant participation. Despite record remittance inflows, Nepali workers continue to avoid investing in government bonds due to low returns, red tape, and poor outreach.
Despite a rising domestic debt load, Citizen Saving Bonds remain stagnant at Rs. 13.4B, showing weak public interest. Analysts cite low yields, poor outreach, and dominance of banks as key reasons for low retail participation.
Nepal’s debt profile is shifting rapidly — development bonds rose Rs. 40 billion, overtaking treasury bills, which dropped Rs. 27 billion in one month. The trend reflects a government strategy toward longer-term borrowing and reduced rollover risk but could raise long-term fiscal pressure.
Nepal’s domestic debt increased by Rs. 12.9 billion in a month, hitting Rs. 1.27 trillion, as the government leaned on long-term development bonds while cutting back on treasury bills. The shift helps stabilize short-term pressures but highlights ongoing fiscal dependence.
Commercial banks now hold over Rs. 1.02 trillion of Nepal’s domestic debt, highlighting both fiscal dependence and potential private-sector crowding-out risks. While safe for banks, the trend underscores growing pressure on liquidity and market-driven interest rates.
NRB slashed its domestic debt holdings by Rs. 53.8B in mid-Aug 2025/26, signaling a fiscal shift that places the burden of financing on banks and institutions, reducing inflation risks but raising crowding-out concerns.