The NEPSE Journal
Market commentary, data deep-dives, and trading notes from the NEPSE Trading desk.
Broad Money (M2) contracted by Rs. 58B in August 2025, reflecting weaker demand deposits, slow private sector credit growth, and cautious banking behavior. While external reserves remain strong, the domestic economy shows signs of tightening liquidity and sluggish growth momentum.
Nepal’s debt is largely financed by its own financial institutions, particularly commercial banks. The rising dominance of long-term bonds reflects a policy shift toward stability but raises concerns over fiscal costs, crowding-out, and debt sustainability.
Nepal’s fiscal structure in 2025/26 relies heavily on long-term development bonds, boosting financing stability but also increasing interest costs and fiscal vulnerability. The challenge ahead lies in balancing debt management with sustainable growth.
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.
