Public Debt Dynamics in Nepal: Domestic and External Liabilities Continue to Rise

Nepal's public finance data reveals a steady and significant increase in both domestic and external debt over recent fiscal years, underlining the government's growing reliance on borrowings to finance national development and budget deficits.

According to the latest figures, domestic debt has surged from Rs. 613.2 billion in the fiscal year 2019/20 to Rs. 1268.6 billion in 2024/25. This marks a more than twofold rise in just six years. The trend reflects consistent annual borrowing by the government through instruments like treasury bills and development bonds, mainly to fund infrastructure projects, meet fiscal shortfalls, and support recovery programs post-COVID.

Similarly, external debt has also climbed considerably—from Rs. 819.7 billion in 2019/20 to Rs. 1253.2 billion in 2024/25. Although there was a temporary dip in mid-2023/24 (Rs. 1170.2 billion), the latest data shows recovery and continued inflows from international development partners and multilateral financial institutions such as the World Bank, ADB, and bilateral donors.

The parallel rise in both domestic and foreign borrowings suggests that while Nepal is managing to diversify its debt sources, it is also gradually increasing its overall public debt burden. This growing debt stock raises concerns about long-term fiscal sustainability and highlights the importance of improving debt utilization efficiency, enhancing domestic revenue mobilization, and maintaining macroeconomic discipline.

In summary, Nepal’s public debt trajectory indicates expanding fiscal commitments and dependency on borrowings, necessitating prudent fiscal strategies to manage repayment obligations and maintain economic stability.