NRB flags rising public debt despite low distress risk
Summary
Nepal's public debt has increased to Rs 2.96 trillion, representing 44.9% of GDP, with concerns over inefficient use of borrowed funds and reliance on recurrent expenditure instead of productive investment.
Key Points
- Nepal's public debt rose to Rs 2.96 trillion in the first 11 months of fiscal year 2025/26, accounting for 44.9% of GDP.
- Public debt increased by around 48% over the past four years, driven by budget deficits, reconstruction costs, federalism expenses, social security, declining grants, and currency depreciation.
- Despite rising debt, Nepal is classified as low risk of debt distress by the World Bank and IMF, though vulnerabilities are growing.
- The NRB emphasizes inefficient use of borrowed funds with only one-third of the capital budget spent, urging faster budget execution and structural reforms for future growth.
