Foreign Loans Rs. 5.1B in One Month: How External Financing Supports Nepal’s Budget

In the first month of fiscal year 2025/26, Nepal received foreign loans worth Rs. 5.1 billion, marking a modest yet vital inflow that continues to support the country’s fiscal operations. According to Nepal Rastra Bank’s Budgetary Operation Report, foreign loan disbursements rose compared to the same period last year, helping the government finance early development and infrastructure projects.

Despite the small share of foreign loans in total financing, this external support remains crucial for Nepal’s capital expenditure and fiscal balance. The government’s total financing during the review period reached Rs. 45.2 billion, with domestic borrowing covering nearly 89% of total needs, and the rest supplemented by external loans. This mix highlights Nepal’s strategy of relying more on domestic resources while still tapping concessional foreign credit for priority sectors such as energy, roads, and social infrastructure.

Economists note that while foreign loans provide liquidity and bridge short-term fiscal gaps, careful debt management is essential to prevent future repayment burdens. With debt servicing costs already rising, the government must ensure that borrowed funds yield productive outcomes through timely project completion and accountability.