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By Sandeep Chaudhary

Loan Repayments Pressure Nepal’s Balance of Payments: Rs. 5.8B Out in One Month

Loan Repayments Pressure Nepal’s Balance of Payments: Rs. 5.8B Out in One Month

Nepal’s external financial position is facing renewed pressure as loan repayments surged to Rs. 5.8 billion in just one month, according to the latest Balance of Payments (BoP) report published by Nepal Rastra Bank. The data highlights a growing debt-servicing burden that could test Nepal’s foreign reserve strength if sustained over time.

In the first month of FY 2025/26, the general government alone repaid Rs. 4.5 billion in external loans, while other sectors accounted for Rs. 1.3 billion, bringing the total outflow to nearly Rs. 5.8 billion. These repayments outweighed fresh loan disbursements, leading to a net negative loan flow, which contributed to tightening liquidity in the external account.

Analysts warn that although Nepal’s current account and reserves remain positive — thanks to strong remittance inflows — rising loan repayments and falling concessional inflows could gradually strain the BoP if export earnings and FDI do not pick up.

Public debt, both domestic and foreign, has been expanding rapidly over recent years due to heavy reliance on borrowing for infrastructure projects and fiscal deficits. Experts caution that if loan repayments continue at this pace without matching inflows from investment or exports, Nepal could face higher refinancing risks in the medium term.

Economists are urging the government to prioritize debt sustainability, focusing on concessional financing, restructuring high-cost loans, and improving project efficiency to avoid a future repayment crisis.

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