Public debt reaches NRs 2.93 trillion, exchange loss over 115 billion

Nepal’s total public debt has climbed to NRs 2.93 trillion as of mid-April 2026, equivalent to 48.04% of the country’s gross domestic product (GDP), according to the Public Debt Management Office (PDMO). Of the total, domestic debt amounts to NRs 1.39 trillion (47.3%, or 22.73% of GDP), while external debt stands at NRs 1.54 trillion (52.7%, or 25.31% of GDP).

At the beginning of the fiscal year in mid-July 2025, total public debt stood at NRs 2.67 trillion. The sharp rise in debt stock has been attributed to fresh borrowing and the impact of exchange rate fluctuations. During the nine-month period, the government raised NRs 348.15 billion in new loans. Exchange rate movements alone added an additional burden of NRs 115.75 billion to external debt.

In the same period, the government repaid NRs 258.44 billion in debt, including NRs 204 billion in principal and NRs 54.27 billion in interest. Of this, NRs 209.38 billion was allocated to domestic debt servicing and NRs 49.06 billion to external obligations. Total debt servicing accounted for 4.23% of GDP.

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The government had set a target to raise NRs 595 billion in debt for the current fiscal year and has achieved 58.45% of that goal by mid-April, mobilising NRs 348.15 billion. Of the total borrowing, NRs 283.66 billion (78.36%) came from domestic sources, while NRs 64.48 billion (27.60%) was raised externally.

Exchange losses continue to inflate the stock of foreign debt

A significant part of the increase came not from fresh loans but from exchange-rate effects. Nepali rupee’s depreciation has produced an exchange loss of NRs 115.75 billion, inflating the local-currency value of Nepal’s foreign obligations even without new disbursements. The Nepali Rupees has depreciated from roughly NRs 137 per US dollar in mid-July 2025 to nearly NRs 150 per dollar at present.

Because most external loans, over 70%, are denominated in special drawing rights (SDR), followed by nearly 20% in US dollars, any weakening of the rupee automatically raises the debt value in Nepali rupees.

According to the PDMO, the government has spent NRs 2.6 trillion by mid-April in debt servicing in the ongoing fiscal year. This accounts for 62.9% of the total allocation of NRs 4.1 trillion in debt servicing. This expenditure is equivalent to 4.23% of GDP.

Over the years, the country’s public debt has grown multifold. In 2014/15, total public debt was around NRs 550 billion, 25.4% of the GDP. In fiscal year 2019/20, it reached NRs 1.43 trillion, corresponding to a debt-to-GDP ratio of 38.1%. This significant increase in outstanding debt over the past decade is mainly linked to three major shocks: the 2015 earthquake, subsequent state restructuring, and the COVID-19 pandemic.

At the same time, consistently weak revenue collection has forced the government to depend increasingly on borrowing. Now, a growing share of debt is being used to service existing liabilities, raising the risk of a “debt trap”.

This situation underscores the need for the new government to focus on investment in productive, high-return sectors, strengthen tax administration, cut unproductive expenditure, and improve the management of exchange rate risks.