Nepal’s outstanding debt increased by Rs 228 billion during mid-April and mid-October

Published On: January 2, 2023 08:10 AM NPT By: Republica  | @RepublicaNepal

The country’s Debt to GDP ratio reaches 41.38 percent

KATHMANDU, Jan 2: Nepal’s public debt to Gross Domestic Product (GDP) ratio has reached 41.38 percent as of the first quarter end of the current fiscal year.

The first quarterly report released by the Public Debt Management Office (PDMO) shows that the country’s outstanding debt has reached Rs 2.078 trillion by mid-October. The government records show that the government borrowing increased by Rs 228 billion during six months’ period starting from mid-April 2022.

According to the PDMO, the country’s GDP reached Rs 4.851 trillion during the review period. Based on the GDP figure and the total debt amount, the country’s debt to GDP ratio stood at 41.38 percent. Out of the figure, 21.64 percentage points was external debt, while the remaining 19.73 percentage points was domestic borrowing.

In the first three months of the current fiscal year, the government took debt of Rs 247 billion from abroad. During the review period, the government did not take any domestic borrowing. Likewise, the government paid back principle and interest amount of Rs 5.84 billion of the external loans and Rs 29.83 billion domestic loans.

Hira Neupane, information officer of the PDMO, said the government is facing a huge financial burden due to the domestic loans, particularly because of a surge in interest rate. According to him, the government needs to pay huge interest rates while issuing treasury bills and bonds.

Getting the privilege of the underdeveloped country, Nepal has been receiving concessional loans from the donor agencies while the external loans are considered. On an average, Nepal pays an interest rate of up to one percent in such foreign loans.

Neupane said the financial liability on the external loans is affected mainly due to the fluctuation in the price of the US dollar. “As the exchange rate of the US dollar surged by a notable amount during the review period, Nepal had to settle additional Rs 5.52 billion as a payment for its outstanding dues,” he said.

The PDMO records show that the amount of public debt as of mid-October declined by 0.27 percent when compared with the amount of mid-July. However, the rise in interest rate and depreciation of domestic currency adversely affected the country’s financial position in terms of interest and loans repayment. During the review period, the Nepalese currency weakened from Rs 128.11 to Rs 132.07 per dollar, shows the records with Nepal Rastra Bank (NRB).   

According to analysts, Nepal is still in a comfortable position to absorb more debt. “However, surging loans will have higher economic cost to the country as we have to repay the loans in the long term by diverting the funds which are supposed to be invested in productive sectors,” said Prakash Kumar Shrestha, chief of economic research department at the NRB.

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