Nepal Public Debt Situation (Mid-March 2026)
Nepal's domestic public debt has been undergoing a structural shift in FY 2025/26. As of mid-March 2026, total outstanding domestic debt shows a rebalancing from short-term Treasury Bills toward longer-term Development Bonds, with significant implications for fiscal management.
Domestic Debt Overview (Mid-March 2026)
| Instrument | Mid-Jul 2025 (Rs. M) | Mid-Mar 2026 (Rs. M) | Change |
|---|---|---|---|
| Treasury Bills | 375,562 | 309,662 | -65,900 (-17.5%) |
| Development Bonds | 873,757 | 1,018,897 | +145,140 (+16.6%) |
| Estimated Total | ~1,249,319 | ~1,328,559 | +79,240 (+6.3%) |
Who Holds Nepal's Debt?
Treasury Bills (Rs. 309,662M):
- Commercial Banks: Rs. 193,409M (62.5%) — down Rs. 115,905M
- Others (incl. individuals, institutions): Rs. 110,570M — up Rs. 51,484M
- Development Banks: Rs. 3,461M
- Finance Companies: Rs. 2,223M
- NRB: Rs. 0 (reduced from Rs. 250M)
Development Bonds (Rs. 1,018,897M):
- Commercial Banks: Rs. 789,270M (77.5%) — up Rs. 66,725M
- Others: Rs. 121,650M — up Rs. 80,548M
- Development Banks: Rs. 83,415M
- Finance Companies: Rs. 15,775M
- NRB: Rs. 8,786M (unchanged)
Key Trends
1. Maturity Extension: The shift from Treasury Bills (-Rs. 65,900M) to Development Bonds (+Rs. 145,140M) extends the average maturity of government debt, reducing rollover risk but locking in higher interest costs.
2. Commercial Bank Dominance: Banks hold Rs. 193,409M of T-Bills and Rs. 789,270M of bonds — totaling nearly Rs. 983B, making the banking system the government's primary creditor.
3. Growing 'Others' Category: Non-bank holders (individuals, insurance companies, EPF) increased their holdings significantly — T-Bills +Rs. 51,484M and Bonds +Rs. 80,548M.
Debt Sustainability Concerns
- Total domestic debt (~Rs. 1.33 trillion) represents roughly 24% of estimated GDP
- Adding foreign debt, total public debt is estimated at 40-45% of GDP — within manageable limits but growing
- Revenue growth (3.04%) is slower than debt growth (6.3%), meaning the debt-revenue ratio is worsening
- Interest payments are a growing share of recurrent expenditure
Conclusion
Nepal's public debt situation in mid-March 2026 is manageable but requires attention. The maturity extension to Development Bonds is a positive step for risk management, but total debt continues to grow faster than revenue. With domestic debt at ~Rs. 1.33 trillion and revenue at Rs. 751,856.7M for 8 months, maintaining fiscal discipline and improving revenue collection are essential for long-term debt sustainability.