Nepal’s per capita public debt increases four-folds in the past one decade

Published On: May 23, 2023 08:30 AM NPT By: Republica  | @RepublicaNepal

The country’s per capita public debt hits Rs 73,860  

KATHMANDU, May 23: Nepal’s per capita public debt increased four-folds in the past one decade, mainly due to an increasing unproductive spending along with slow growth in the government revenue collection.

The records of the Public Debt Management Office (PDMO) show that Nepal’s public debt per capita has reached Rs 73,860 as of mid-April, based on the total population of 29.16 million as recorded by the Population Census 2021. The amount was recorded at Rs 18,866 in the fiscal year 2011/12.

The per capita debt rose to Rs 45,753 in 2020/2021, while it further increased to Rs 63,310 in 2021/22. It shows that the country has been facing an increasing financial burden at an escalating rate.

In the past one decade, the country’s total debt amount also increased four-folds from Rs 509.50 billion to Rs 2.154 trillion. Similarly, the ratio of debt to the gross domestic products has increased from 6.19 percent to 44.40 percent in the review period.  

In the first 10 months of the current fiscal year, the amount of public debt increased by Rs 140.82 billion to Rs 2.154 trillion. As of mid-April this year, the country’s internal loan stood at Rs 1.083 trillion while external loan was recorded as Rs 1.070 trillion.   

An increasing unproductive expense of the government amid slow rate of revenue collection has been attributed for the soaring borrowing of the government. Public debt has important effects on the operation of the economic system of the country.

Although the government has taken austerity measures to reduce the government’s undesired spending, they have not been effective till date. Last year, the government enacted the Public Debt Management Act which has capped external debt at one-third of the previous fiscal year’s GDP to curb the rising debt. Based on the new law, the government can raise a maximum internal loan of Rs 256 billion for the current FY 2022/23. 

The soaring amount of public debt has resulted in a notable decline in capital formation in the economy. During mid-July 2022 and mid-April 2023, the state paid Rs 143.42 billion in debt financing, which includes repayment of principal and interest expense. This will ultimately affect the development activities and the government targeted programs, according to economists.   

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