Fiscal Nepal
First Business News Portal in English from Nepal
KATHMANDU: The Government of Nepal has significantly fallen short of its annual external borrowing target for the current fiscal year, raising only Rs 99.20 billion, or 45.72% of the total projected external loan of Rs 217 billion, according to the latest report from the Public Debt Management Office (PDMO) as of mid-June 2025 (end of Jestha 2082 BS).
While external borrowing remains sluggish, the government has nearly achieved its domestic borrowing goal. Out of the targeted Rs 330 billion in internal loans for the fiscal year, about Rs 315 billion—95.45%—has already been raised within the first eleven months.
According to Gopi Krishna Koirala, Chief of the PDMO, the slowdown in external loan inflow is mainly due to delays in capital project execution. “Most of the external loans—whether bilateral or multilateral—are project-tied. Disbursements occur only after physical progress is made on the respective projects. Since many agencies failed to execute the works on time, loan disbursements have lagged behind,” he stated.
Koirala clarified that although such loans are listed as sources in the national budget, the government typically spends from internal resources first, and reimbursement from development partners happens only upon verified project milestones. Most donors provide project financing, not direct budgetary support.
Meanwhile, the Office of the Auditor General reported that capital expenditure had reached only around 42% of the annual target by the end of Jestha, reinforcing concerns about underperformance in development spending.
Total Public Debt Reaches Rs 2.65 Trillion
As of mid-June 2025, Nepal’s total outstanding public debt has climbed to Rs 2.65 trillion (Rs 2,654.68 billion). This represents 43.47% of the country’s Gross Domestic Product (GDP). Of the total, external debt accounts for 52%, and domestic debt makes up 47.94%.
Specifically, the outstanding internal debt stands at Rs 1.72 trillion, while the external debt is about Rs 1.82 trillion.
For the ongoing fiscal year, the government had aimed to mobilize Rs 547 billion in public debt. So far, it has secured Rs 414.19 billion, achieving 75.72% of the total debt mobilization target.
Debt Servicing Costs Soar
In the first eleven months of the fiscal year, the government spent Rs 329.60 billion on debt servicing. Of this:
Rs 223.35 billion was used for domestic debt principal repayment.
Rs 54.37 billion for domestic interest payments.
Rs 43.29 billion for external loan repayments.
Rs 8.57 billion for interest on external loans.
The budget allocated for total debt servicing for this fiscal year was Rs 402.85 billion.
Despite stronger performance in domestic borrowing, Nepal’s failure to meet external loan targets highlights deeper challenges in capital project execution, and raises questions about fiscal planning and budget credibility.
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