Nepal’s public debt has surged as the government increasingly uses new loans to repay existing obligations, highlighting growing fiscal pressure.
In the first eight months of the current fiscal year, the government mobilised about Rs 3.46 trillion (around $23.5 billion USD) in public loan funds. During this period, Rs 2.42 trillion (over $16.4 billion USD) was spent on servicing principal and interest on earlier borrowings. This means more than 80 per cent of new loans went toward old debt repayments.
Total public debt now stands at Rs 28.78 trillion (about $196 billion USD), equal to nearly 47 per cent of Nepal’s GDP. Of this, around Rs 13.48 trillion (about $92 billion USD) is domestic debt, and Rs 15.30 trillion (about $104 billion USD) is external debt.
Revenue collection continues to struggle, covering mainly basic government operating costs and leaving little room for capital investment without borrowing. Meanwhile, exchange rate movements have added further weight to external debt as the Nepali rupee remains weak against the US dollar.
Experts warn that much of the borrowed funds have not been directed to projects that generate strong financial returns, raising questions about long-term sustainability. Debt repayments are expanding faster than revenue growth, squeezing budgets for key services such as health and education.
The government has set a total borrowing target of almost Rs 5.95 trillion (about $40 billion USD) for the full fiscal year, with just over half achieved so far.