KATHMANDU, Sept 24: Nepal’s public debt stood at Rs 2.97305 trillion as of September 16, 2026, the end of the second month of fiscal year 2026/27. That amounts to 45.05 percent of gross domestic product.
Foreign loans account for 54.19 percent of total public debt, while domestic loans make up 45.81 percent. Domestic debt stands at Rs 1.36187 trillion and foreign debt at Rs 1.61118 trillion.
According to a monthly report released on Wednesday by the Public Debt Management Office under the Ministry of Finance, the government borrowed Rs 61.05 billion in the first two months of the fiscal year. During the same period, it paid Rs 70.13 billion in loan principal and Rs 14.87 billion in interest.
Following the government’s policy of avoiding unnecessary spending and excessive borrowing, the National Natural Resources and Fiscal Commission has recommended that domestic loans should fund projects that create capital assets, rather than recurrent and administrative expenses.
The Public Debt Management Office said the government’s outstanding debt was approaching Rs 3 trillion by mid-September. It was slightly lower than at the end of the previous fiscal year in mid-July, when public debt stood at Rs 2.98170 trillion. Repayments exceeded new borrowing during the first two months, bringing the outstanding balance down.
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The report says exchange rate losses added Rs 436.3 million to public debt during the period. Even after that increase, the Rs 70.13 billion paid in principal left total outstanding debt below its mid-July level.
For fiscal year 2026/27, the government aims to raise Rs 658.28 billion in public loans. It had received Rs 61.05 billion by mid-September, or 9.28 percent of the annual target. Of its Rs 410 billion domestic borrowing target, it had raised Rs 50 billion, or 12.20 percent.
The government also aims to raise Rs 248.28 billion in foreign loans this fiscal year. It had received Rs 11.05 billion by mid-September, equivalent to 4.45 percent of that target.
Domestic loans accounted for 81.89 percent of borrowing during the first two months, while foreign loans made up 18.11 percent. The government raised Rs 20 billion in domestic loans in the first month and Rs 30 billion in the second. Foreign borrowing amounted to Rs 3.84 billion and Rs 7.21 billion in the respective months.
The government has allocated Rs 417.88 billion for debt servicing this fiscal year, covering principal and interest payments. By mid-September, it had spent Rs 85.0106 billion, or 20.34 percent of the annual allocation. Debt servicing during the period amounted to 1.29 percent of GDP.
Finance Ministry data show that public debt has nearly doubled in the past seven years. At the end of fiscal year 2019/20, it stood at Rs 1.43340 trillion. It has since risen to nearly Rs 3 trillion. Over that period, public debt increased from 38.05 percent of GDP to more than 45 percent.
Experts attribute the continuing rise to growing public spending, declining foreign grants and revenue collection falling short of expectations. They also point to weaknesses in selecting productive projects that add to the country’s capital stock.
A report by the High-Level Economic Reform Advisory Commission, formed in 2024, warned that GDP and revenue had not grown in step with public debt. As a result, principal and interest payments were taking up a growing share of public resources.
The commission warned that if borrowed money was not used well and failed to produce returns, Nepal would face a greater risk of falling into a debt trap. Growing repayment obligations could also leave the government short of funds for essential responsibilities, including education, health and security. In line with those findings, experts have urged government agencies to direct borrowing towards projects that create capital assets.
More spent on debt than development
In the first two months of the fiscal year, the government spent far more on debt servicing than on capital projects. By mid-September, debt payments totaled Rs 85.0106 billion, while capital expenditure was Rs 7.66 billion.
Domestic debt principal payments amounted to Rs 63.54 billion, with another Rs 13.25 billion paid in interest. The government paid Rs 6.59 billion in foreign debt principal and Rs 1.61 billion in interest. Total principal payments were Rs 70.13 billion and interest payments Rs 14.87 billion.
The Public Debt Management Office’s monthly figures show that the government spent more on managing its obligations than on capital works during the period. The Office of the Auditor General’s 63rd report also raised concern about this pattern of spending.
Some experts describe Nepal as having become indebted before becoming wealthy. They compare its position to that of a person who must borrow again to repay existing loans, and say the government’s spending pattern shows signs of the same problem.
