Treasury Bills Decline Sharply by Rs 56.4 Billion While Long-Term Bonds Surge – GoN Debt Update

Nepal’s short-term borrowing instruments, primarily treasury bills, have fallen significantly by Rs 56.4 billion in the first two months of FY 2025/26, according to the latest Nepal Rastra Bank (NRB) data on the Outstanding Domestic Debt of the Government of Nepal (GoN). This marks a notable shift in the government’s debt management strategy—away from short-term financing and toward long-term borrowing through development bonds.

As of mid-September 2025, the outstanding volume of treasury bills stood at Rs 319.16 billion, down from Rs 375.56 billion in mid-July. The decline was largely driven by reduced holdings from commercial banks, which saw their exposure to treasury bills shrink by Rs 56.8 billion to Rs 252.54 billion, reflecting a fall in short-term liquidity absorption by the banking sector.

In contrast, development bonds surged by Rs 70 billion year-on-year, reaching Rs 943.76 billion, underscoring the government’s increased reliance on long-term domestic borrowing to fund budgetary expenditures and infrastructure projects. Commercial banks held the largest portion of these bonds—Rs 770.32 billion—followed by development banks (Rs 86.9 billion) and finance companies (Rs 16.5 billion).

The NRB report shows that Nepal’s total domestic debt reached Rs 1.27 trillion by mid-September 2025, a net increase of Rs 13.6 billion from mid-July. Despite the overall rise, the composition of debt is changing—short-term borrowings are contracting, while long-term instruments like development bonds are expanding, signaling a deliberate policy shift toward stable financing sources.

Economists view this trend as a positive move for fiscal sustainability, as it reduces the refinancing burden and interest rate volatility associated with treasury bills. However, they also caution that excessive reliance on the banking sector for bond absorption could tighten private sector credit, particularly if liquidity conditions deteriorate later in the year.

The NRB and Ministry of Finance have emphasized maintaining a balanced debt portfolio, combining long-term bonds and short-term bills to manage liquidity while ensuring fiscal stability.