Fiscal Nepal
First Business News Portal in English from Nepal
KATHMANDU: Nepal’s public debt has continued to climb, raising concerns over fiscal sustainability as debt servicing costs grow faster than government revenues and economic expansion remains modest.
According to government financial data, Nepal’s total public debt reached approximately NPR 2.72 trillion by mid-October 2025 (end of Asoj 2082). The debt stock increased by more than NPR 50.6 billion in the first quarter of fiscal year 2082/83 (2025/26) alone, reflecting continued reliance on borrowing to finance budgetary requirements.
As of the same period, Nepal’s public debt stood at around 44.6 percent of gross domestic product (GDP), indicating a steady upward trend in the debt-to-GDP ratio. Economists note that while the ratio remains below levels considered critical by international standards, the pace at which debt is rising relative to GDP has become a growing policy concern.
In terms of composition, external debt accounts for about 53 percent of total public debt, amounting to approximately NPR 1.446 trillion, while domestic debt makes up the remaining 47 percent, or around NPR 1.278 trillion. The growing share of both domestic and foreign borrowing has increased the government’s exposure to interest rate risks, exchange rate fluctuations, and refinancing pressures.
Officials acknowledge that public debt is expanding faster than economic growth, narrowing fiscal space for capital expenditure and productive investment. Rising allocations for principal repayment and interest payments are consuming a larger share of annual revenue, limiting the government’s ability to scale up spending on infrastructure, social services, and development programs.
Fiscal experts have also warned of a potential debt spiral risk, where higher borrowing leads to increased servicing costs, which in turn necessitate further borrowing to meet expenditure needs. This dynamic could constrain Nepal’s future borrowing capacity if revenue growth and capital spending efficiency do not improve.
Despite repeated commitments to prudent debt management, the continued increase in public debt underscores structural challenges in Nepal’s economy, including weak capital expenditure execution, limited domestic revenue mobilization, and persistent dependence on loans to bridge fiscal deficits.
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