Rising Public Debt in Nepal
Kathmandu – As of last February, Nepal's outstanding public debt has surged to NPR 2,676.03 billion (26.76 trillion), accounting for 46.91% of the country's Gross Domestic Product (GDP). This means that each Nepali citizen now shoulders approximately NPR 91,000 in public debt.
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Public Debt Per Capita: A Growing Concern
In the last fiscal year, each Nepali owed about NPR 83,000. At that time, the total public debt stood at NPR 2,434.09 billion (24.34 trillion). This sharp increase underscores the growing financial burden on the nation.
According to the 2021 National Census published by the National Statistics Office, Nepal’s total population stands at 29,164,578. The per capita debt figure is derived by dividing the total outstanding debt by this population count. With Nepal’s GDP projected to reach NPR 5,705 billion (57.05 trillion) in the last fiscal year, economic experts warn that the rising public debt poses significant financial risks for the nation.
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Internal vs. External Debt: A Closer Look
Of the total outstanding public debt:
- Internal debt accounts for NPR 1,315.57 billion (13.15 trillion), which is 23.06% of GDP.
- External debt stands at NPR 1,360.46 billion (13.60 trillion), constituting 23.85% of GDP.
The growing reliance on external loans raises concerns about Nepal’s debt sustainability, particularly in the face of economic slowdowns and declining revenue generation.
Government's Borrowing Target and Progress
For the current fiscal year, the government has set a target to raise NPR 547 billion (5.47 trillion) in public debt. As of February, NPR 334.62 billion (3.34 trillion) has already been borrowed, reflecting the government's dependence on debt financing to cover budget deficits.
Economic Implications of Rising Public Debt
Economic analysts caution that the increasing public debt could lead to financial instability if not managed effectively. High debt levels can impact:
- Government expenditure, leading to higher interest payments.
- Inflation and economic growth, as borrowing increases fiscal pressure.
- Future tax burdens, potentially affecting businesses and citizens.
The Way Forward
To ensure financial stability, Nepal must adopt strategic measures such as:
- Enhancing revenue collection through improved tax policies and enforcement.
- Promoting economic growth to generate higher GDP and reduce debt dependency.
- Implementing responsible borrowing practices to manage long-term financial sustainability.
Conclusion
Nepal's rising public debt is a growing concern that requires immediate attention. While borrowing is necessary for development and economic expansion, excessive debt without proper management can lead to financial instability. The government must focus on sustainable economic policies, improved fiscal discipline, and effective debt management strategies to secure a stable financial future. Responsible borrowing and increased revenue generation will be key to reducing the debt burden and fostering long-term economic resilience.
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