Nepal’s per capita debt crosses Rs 90,000 due to an increase in government’s unproductive public expenditure

Published On: January 25, 2024 08:30 AM NPT By: Republica | @RepublicaNepal

Public debt soars to Rs 2.384 trillion including Rs 1.186 trillion in external borrowing and Rs 1.198 trillion in domestic borrowing

KATHMANDU, Jan 25: Nepal’s public debt reached Rs 2.384 trillion, with an addition of Rs 162.58 billion debt in the first half of the current fiscal year.

According to the Public Debt Management Office (PDMO), there was a whopping rise in the government’s borrowing during mid-July and mid-January this year. The public debt accounts for 44.3 percent of the country’s gross domestic product (GDP), while the per capita debt has crossed Rs 90,000.

As per the PDMO records, the share of the internal borrowings in the public debt has exceeded the proportion of the external borrowing. Nepal owes Rs 1.186 trillion to foreign sector, while the domestic borrowing stands at Rs 1.198 trillion.

According to the PDMO, the size of the public debt has been increasing by a notable amount mainly in the past five years. In the fiscal year 2018/19, the size of public debt was only 30.26 percent of Nepal’s GDP, while it grew to 38.05 percent in the next year. It reached 40.73 percent of the GDP in 2020/21, 41.50 percent in 2021/22 and 42.73 percent in 2022/23. Just in the past six months, it surged by 1.57 percentage points.

An increased recurrent expenditure of the government amid slow revenue collection has been aiding in the ballooning size of the public debt. The government has been compelled to meet its immediate financial liabilities by the amount received in borrowing.

During the first half of the current fiscal year, the government collected revenue worth Rs 518 billion, which is 77 percent of the revenue target for the period. On the other hand, the government spent Rs 566 billion, resulting in a negative balance of Rs 48 billion in the state treasury.

Meanwhile, the government settled Rs 116.58 billion in debt management including the interest and principal amount in the first half of the current fiscal year. Of the amount, Rs 39.13 billion was paid alone as interest liabilities.

The amount paid for the public debt management was more than double the amount that the government spent for development projects. During the review period, the government made capital expenditure of only Rs 49.23 billion, which is equivalent to 42 percent of the amount paid against the public debt.