Nepal’s public debt has grown by more than €1.68 billion (NPR 300 billion) in the first ten months of the current fiscal year, according to new figures from the Public Debt Management Office under the Ministry of Finance, underscoring the mounting fiscal pressures facing one of South Asia’s smaller economies.
The increase brings total public debt to roughly €16.66 billion (NPR 2,975 billion) by mid-May 2026, a rise of around 11 per cent since the start of the fiscal year. For a country whose economy remains heavily dependent on remittances and foreign aid, the pace of borrowing has drawn renewed scrutiny from economists and fiscal watchdogs.
More than half of Nepal’s total debt is owed to external creditors, and that share is growing faster than domestic obligations. The gap has been widened considerably by currency depreciation: the weakening of the Nepali rupee against the US dollar alone added nearly €940 million (NPR 167.75 billion) to the debt burden during the period, without the government borrowing a single additional rupee. It is a dynamic familiar to many developing nations, where loans denominated in foreign currencies can balloon in local-currency terms when exchange rates move unfavourably.
The debt-to-GDP ratio now stands at 45.08 per cent, a level which cannot be immediately interpreted to be at crisis point by international standards. However, the rise is significant for a country that has historically kept borrowing relatively contained. Economists typically flag the 60 per cent threshold as a point of concern, but the speed of Nepal’s trajectory matters as much as the absolute figure.
On the domestic side, the government has been a heavy user of internal capital markets, having already drawn down more than four-fifths of its annual domestic borrowing target with nearly two months of the fiscal year still to run. External financing has been far slower to materialise, with only around a quarter of the year’s foreign loan target actually disbursed. That imbalance reflects longstanding difficulties in meeting the conditions and implementation benchmarks that multilateral lenders typically attach to project financing.
Debt servicing costs continue to absorb a substantial share of public resources. The government has spent the equivalent of roughly €1.64 billion (NPR 292.52 billion) on principal and interest repayments so far this year, consuming more than 70 per cent of the budget set aside for that purpose. With two months remaining in the fiscal year, further spending on debt obligations is inevitable, leaving less room for capital investment in infrastructure, health and education.