Nepal’s Public Debt Nears Rs. 2.5 Trillion: Rising Domestic and External Borrowing Highlight Fiscal Challenges

Nepal’s public debt has continued its upward trajectory in the fiscal year 2024/25, with both domestic and external debt increasing notably. According to mid-May data, the domestic debt has climbed to Rs. 1262.8 billion, up from Rs. 1190.1 billion in the same period of the previous fiscal year. This marks a steady rise from Rs. 613.2 billion in 2019/20, reflecting the government's growing reliance on internal borrowing to manage fiscal deficits and finance development projects.

On the external front, Nepal’s external debt stood at Rs. 1253.2 billion by mid-May 2024/25, recovering from Rs. 1170.2 billion recorded mid-May last fiscal year. The year-on-year increase shows an ongoing dependence on foreign loans, often tied to infrastructure projects, concessional credit lines, and multilateral donor support. Compared to Rs. 819.7 billion in 2019/20, the current figures signify a significant 52.9% rise in external debt over five years.

Overall, the total public debt (domestic + external) now stands close to Rs. 2.52 trillion. While the increasing domestic debt may suggest confidence in local borrowing mechanisms, the parallel rise in external debt could elevate risks related to foreign exchange volatility and repayment burdens, particularly if revenue mobilization remains sluggish.

These trends underscore the need for prudent fiscal management, enhanced revenue generation, and strategic debt utilization to ensure that rising liabilities do not threaten long-term macroeconomic stability.