Kathmandu, Mar. 18: The total outstanding debt of the government of Nepal reached Rs. 2,388.26 billion as of March 13, 2024.

Out of total debt, external debt amounts to Rs. 1,202.73 billion and domestic debt comprises Rs. 1,185.52 billion, according to the report of Public Debt Management Office under the Ministry of Finance.

During the first eight months of the current fiscal year 2023/24, the total outstanding debt has increased by 4.04 per cent consisting of an increase in external debt and internal debt by 2.7 per cent and 5.36 per cent respectively.

External public debt represents more than half of total outstanding public debt as of mid-March of the current fiscal year. Share of external public debt to the total outstanding debts is 50.36 per cent while the share of domestic debts is 49.63 per cent.

Economist Dr. Chandra Mani Adhikari said that the ratio of domestic public debt has been increasing rather than external debt to meet the expenditure.

“The government is compelled to take domestic loans even to recover recurrent expenditure. The revenue is not collected as per the government target. So, there is no option for the government to collect debts from the domestic market,” he told The Rising Nepal.

The present scenario shows that the share of domestic debts to the total public debts will be higher than the share of external debts to public debts.

The government has taken an additional loan of Rs. 218.86 billion in 

the first eight months of the current fiscal year. 

Out of additional public debt, the government has taken a loan of Rs. 163.31 billion under the domestic public debt and Rs. 55.55 billion under the external public debt.

The government has set a target of collecting an additional Rs. 452.75 billion of loan to meet the budget deficit for the current fiscal year. 

Out of this Rs. 240 billion is aimed to be collected through domestic borrowing and Rs. 212.75 billion through external loans. 

The data also shows that the government has paid only Rs. 126. 03 billion as principal payments of such loans. Of them, the government has paid Rs. 102.97 billion for principal payment of domestic loans and Rs. 23.06 billion for external loans.

Domestic debt comprises mainly short-term and long-term securities issued at the domestic market and loans borrowed from the central bank.

Dr. Adhikari said that development partners give loans based on programmes and projects, but due to the lack of speed in the development work, external public debt mobilisation could not be done as per the target.

“When the government collects more debt from the domestic market, it will affect the national economy as the interest rate of domestic loans is higher than the external loans and the credit to the private sector drops,” he said.

When the revenue collection of the government has hit rock bottom, the budget deficit was being met by raising loans and the low/dismal revenue collection. On the other hand, as the principal and interest of the loans are increasing every year, a large part of the annual budget is being spent on it. 

The total debt to GDP ratio is 44.38 per cent as of March 13, 2024. The external debt to GDP ratio is 22.35 per cent and domestic debt to GDP ratio is 22.03 per cent.

At the end of fiscal year 2022/23, the debt to GDP ratio was 42.73 per cent consisting of 21.75 per cent on external debt and 20.98 per cent on domestic debt.

The total public debt was Rs. 2,295.43 billion by the end of last fiscal year 2022/23.