Nepal govt faces alarming surge in public debt

Kathmandu: Public debt liability of the Government of Nepal has witnessed an unprecedented surge, reaching a staggering Rs 2.3 trillion within a span of five and a half years.

As of the fiscal year 2018/19, the combined internal and external debt stood at a relatively modest Rs 1.04 trillion. However, recent data indicates an alarming escalation, with the government’s debt burden skyrocketing by over Rs 1.3 trillion during this relatively short timeframe.

Economist Dilli Raj Khanal highlights a concerning trend, noting a significant increase in the government’s inclination towards acquiring public debt over the past decade. “In the last decade, the tendency of the government to take public loans is increasing,” warns Khanal.

The surge in public debt is attributed to the government’s struggles in meeting revenue targets, prompting a rapid rise in both internal and external loans over the past five years. This financial trend has resulted in a considerable spike in the overall public debt liability.

According to the Public Debt Management Office (PDMO), the public debt was recorded at Rs 1.04 trillion in FY 2018/19. However, within just one year, this figure soared to Rs 1.4 trillion in FY 2019/20, reflecting an increase of over Rs 300 billion.

The escalation continued in subsequent years, with the public debt reaching Rs 1.7 trillion in 2020/21, witnessing a substantial rise of over Rs 250 billion in a single year. By the fiscal year 2022/23, the public debt had climbed to Rs 2.2 trillion.

As of the latest update in mid-December of FY 2023/24, the total public debt liability stands at an alarming Rs 2.3 trillion. Notably, the internal debt is reported at Rs 1.197 trillion, while the external debt is at Rs 1.173 trillion.

The growing public debt poses a significant economic challenge for Nepal, raising concerns among experts and citizens alike about the long-term financial stability of the country. The government’s continued reliance on public loans to cover recurrent expenses further amplifies the urgency of addressing this escalating financial crisis.