Opinion | Strengthening public financial management
Summary
Nepal's public financial management suffers from inefficiencies, with debt servicing costs far outpacing investment in capital assets, leading to fiscal imbalance and potential stagnation. Despite established frameworks, disconnects in planning and budgeting hinder effective capital formation and fiscal discipline.
Key Points
- Nepal's government spends three times more on debt servicing than on capital asset investment, indicating systemic inefficiency.
- Capital expenditure execution is low, with only 12.12% of the annual target achieved, while recurrent costs and debt payments consume over 40% of allocations.
- Subnational governments hold unspent cash balances due to project unreadiness, while the federal government relies on expensive borrowing to cover revenue shortfalls.
- Domestic debt dominates Nepal's debt stock, leading to a vicious cycle of debt servicing that threatens fiscal sustainability.
