Treasury Bills Fall Rs. 27B as Government Shifts Towards Long-Term Borrowing

Nepal’s domestic debt structure is undergoing a visible transition. In the first month of fiscal year 2025/26, the government’s reliance on treasury bills sharply decreased, with outstanding T-bills dropping from Rs. 375.6 billion in mid-July to Rs. 348.4 billion in mid-August. This Rs. 27.1 billion fall is not just a statistical change—it reflects a deliberate policy move to reduce dependence on short-term borrowing that must be rolled over every three to six months.

Treasury bills have traditionally been used to meet immediate cash flow needs of the government. However, their short maturity period means that the Ministry of Finance frequently faces refinancing pressure, creating volatility in liquidity management. By contrast, development bonds, which carry maturities of several years, provide the government with longer-term financing stability. Data from Nepal Rastra Bank shows that in the same month when treasury bills contracted, development bonds expanded by nearly Rs. 40 billion, reaching Rs. 913.7 billion. This indicates a clear pivot in debt strategy toward instruments that give more time for repayment.

Commercial banks—historically the largest buyers of treasury bills—have reduced their holdings significantly, from Rs. 309.3 billion in mid-July to Rs. 271 billion in mid-August. Analysts suggest that this decline may ease short-term liquidity pressures on the banking sector, allowing banks to channel more credit toward the private sector. However, the switch to longer-term debt could raise future interest costs for the government, as development bonds typically carry higher yields than short-term securities.

The fall in treasury bills also highlights the broader fiscal position of Nepal. With revenues struggling—down by 10.5% year-on-year in the first month—the government has had to rely more heavily on borrowing. Choosing long-term debt over short-term instruments may be a way to spread repayment obligations over time, but it could also increase the cumulative debt servicing burden in the coming years. Experts note that this balancing act between liquidity management, fiscal discipline, and debt sustainability will define Nepal’s public finance trajectory in 2025/26.