Nepal's rising public debt is hard to ignore as the rupee just hit a record low versus the US dollar, which is putting a strain on the government finances. On January 25, the Nepal Rastra Bank set the exchange rate at Rs 147.41 per dollar. That's about a Rs 10 drop in value over the last six months. This drop matches the Indian rupee's struggles since Nepal's money is pegged to it. India's market isn't doing fine, as money is flowing out and rising prices are up along with the rise in the US Treasury yields, which has made the dollar stronger all across the globe. For Nepal, which borrows money from other countries, the falling rupee means it costs more to pay back debts, making the country’s finances riskier. The Public Debt Management Office says Nepal's debt hit Rs 28.06 trillion in mid-January. It was Rs 26.74 trillion at the end of last year. Money borrowed from inside the country is at Rs 13.19 trillion, but debt from other countries is at Rs 14.87 trillion. This is the first-time in recent years that foreign debt has been higher than domestic borrowing. In the first part of the year. The government borrowed Rs 214.55 billion and spent Rs 152.89 billion on debt payments. The drop in the rupee's value alone added Rs 70.68 billion to what Nepal owes, which shows how much exchange rates mess with Nepal's financial situation.
Public debt exceeds Rs 2.434 trillion, increasing by over Rs 30...
This situation has resulted from problems at home and around the world. Nepal's economy relies on imports of several goods, including foods, electronics, luxury items, machines and equipment. Rising prices for goods globally and the strong dollar have made borrowing from other countries costlier. At the same time, the local market isn't growing much, which makes it harder for the government to make money and deal with the growing debt. Remittances from workers overseas, tourism, and exports do help a bit since these bring in foreign currencies. Nepal's rising external debt is a worry for our policymakers and economists. If most of the debt has to be repaid in foreign currency, then the drop in the rupee against the dollar will make our finances weaker. It is sad to note that much of the government's budget is eaten up by debt repayment, which leaves little room for carrying out development projects and people’s welfare programs. To pay a higher amount of debt has often compelled the authorities to borrow just to pay off old debts, which harms our economy and long-term growth.
To fix this, Nepal needs to act fast and plan for the future. They should find different ways to create wealth. Increasing domestic production both for local use and exports and relying less on foreign imports are key to addressing the growing debt. Making Nepal a good place to invest can also get foreign investment instead of borrowing a lot. Also, being careful with exchange rates and using foreign money wisely can ease some fiscal problems right away. Policies aimed at increasing exports, promoting tourism, and bringing in remittances must be made. Earning more foreign currencies, especially dollars, can help to check the rapid slide in the rupee’s depreciation. As such, our policymakers must work to manage finances well and enhance domestic production along with bolstering the agriculture and tourism sectors. These steps are key to slowing the rise in public debt, which will undoubtedly play a vital role in giving our economy a sustainable recovery from the ever-increasing public debt burden, which is happening due to a weaker rupee and a stronger dollar.
