Public Debt Declines Slightly, but Repayment Pressure Mounts as Nepal Spends Rs 25 Billion on Debt Servicing in First Month

August 25, 2026 admin

KATHMANDU — Although Nepal’s total public debt saw a marginal decline in the first month of the current fiscal year, fiscal pressure on the government remains high as debt servicing obligations continue to surge.

According to data released by the Public Debt Management Office (PDMO), the country’s total public debt decreased by Rs 5.03 billion during the month of Shrawan, settling at Rs 2,976.33 billion (Rs 29.76 trillion). The total outstanding debt stood at Rs 2,981.68 billion at the beginning of the fiscal year. Officials attributed this slight drop primarily to favorable foreign currency exchange rate fluctuations alongside principal repayments.

Despite the statistical dip, the actual debt liability on the national treasury shows no sign of easing. Public debt currently stands at 45.10% of Nepal’s Gross Domestic Product (GDP), with external debt accounting for 53.72% and domestic borrowing making up 46.28% of the total liability.

Debt Servicing Outpaces New Borrowings

During Shrawan, the government mobilized Rs 23.29 billion in new public debt. However, during the exact same period, it spent Rs 24.99 billion on servicing existing liabilities—comprising Rs 19.15 billion in principal repayments and Rs 5.84 billion in interest payments.

This resulted in a net negative borrowing balance of approximately Rs 1.71 billion, underscoring that the government is expending substantial resources to settle past obligations rather than financing new developmental initiatives. The government has earmarked Rs 417.88 billion for debt servicing for the entire fiscal year, with roughly 6% already utilized in the first month alone.

Heavy Reliance on Domestic Financing

For the current fiscal year, the government has set an ambitious target to raise Rs 658.28 billion through public loans. In the first month, only 3.54% of this annual target was mobilized:

Internal Debt: Rs 20 billion (85.84% of total loans mobilized in Shrawan)
External Debt: Rs 3.29 billion (14.16% of total loans mobilized in Shrawan)

With plans to raise Rs 410 billion in domestic debt this fiscal year (including Rs 300 billion via Development Bonds), economists warn that disproportionate dependence on domestic borrowing risks crowding out private-sector credit and tightening liquidity in the banking system.