Outstanding Domestic Debt Grows Rs. 12.9B in a Month Despite Treasury Bill Decline

Nepal’s outstanding domestic debt rose by Rs. 12.9 billion in just one month, reaching a total of Rs. 1.27 trillion by mid-August of fiscal year 2025/26, according to the latest data from the Nepal Rastra Bank (NRB). The increase comes despite a sharp fall in short-term borrowing through treasury bills, suggesting that the government is increasingly relying on long-term financing instruments such as development bonds.

The stock of treasury bills declined by Rs. 27.1 billion, dropping from Rs. 375.5 billion in mid-July to Rs. 348.4 billion in mid-August. In contrast, development bonds surged by Rs. 40 billion, reaching Rs. 913.7 billion — accounting for nearly three-fourths of the total domestic debt portfolio. This shift toward longer maturity borrowing reflects the government’s attempt to reduce refinancing pressure and stabilize interest rate volatility.

Among debt holders, commercial banks continue to dominate with over Rs. 1 trillion in total holdings, while NRB’s exposure has fallen drastically to just Rs. 12 billion, down from Rs. 20.4 billion a month earlier. Development banks and finance companies hold relatively small shares of Rs. 91.5 billion and Rs. 17.7 billion respectively.

Economists view this month’s increase in overall debt as a sign of rising fiscal dependence on domestic borrowingamid sluggish revenue growth and limited foreign aid inflows. Although the maturity structure has improved, the growing debt burden could still pressure the financial system’s liquidity and raise the government’s interest obligations over time.