Nepal’s Domestic Debt Climbs to Rs 1.27 Trillion – NRB Data Shows Rs 13.6 Billion Rise in FY 2025/26

Nepal’s outstanding domestic debt increased to Rs 1.27 trillion by mid-September 2025, reflecting a modest rise of Rs 13.6 billion from mid-July 2025, according to the Nepal Rastra Bank (NRB)’s latest report on the Outstanding Domestic Debt of the Government of Nepal (GoN). The growth highlights the government’s continued reliance on domestic borrowing to finance its fiscal deficit and maintain liquidity amid slower revenue growth.

The report shows that total domestic debt rose from Rs 1.263 trillion in mid-July to Rs 1.277 trillion in mid-September 2025. The increase was primarily driven by the issuance of development bonds, which expanded by Rs 70 billion year-on-year, reaching Rs 943.76 billion, making it the largest component of domestic borrowing.

In contrast, treasury bills declined sharply by Rs 56.4 billion, falling to Rs 319.16 billion, indicating reduced short-term borrowing needs. The share of commercial banks in treasury bill holdings also fell by Rs 56.8 billion, suggesting a shift in investor preference toward longer-term instruments.

Development bonds, mainly held by commercial banks (Rs 770.32 billion) and development banks (Rs 86.92 billion), saw robust growth due to the government’s focus on long-term financing. Meanwhile, citizen saving bonds and foreign employment bonds remained stable at Rs 13.42 billion and Rs 330 million, respectively, showing minimal public participation in these retail instruments.

By ownership, commercial banks continued to dominate Nepal’s domestic debt market, holding Rs 1.02 trillion, or roughly 80% of total government debt instruments. Development banks held Rs 91.88 billion, while finance companiesand others accounted for Rs 17.98 billion and Rs 131.9 billion, respectively.

Economists view the gradual rise in domestic debt as a reflection of the government’s increased fiscal financing needs amid revenue shortfalls and limited foreign loan inflows. They caution, however, that the growing reliance on internal borrowing could crowd out private sector credit if not managed carefully.

The NRB report also emphasizes the importance of balanced debt management, recommending a strategic mix of short- and long-term instruments to reduce refinancing risk and maintain financial stability.