By the conclusion of Fiscal Year 2023–2024, the government's debt have reached Rs. 2,433.23 billion.

KATHMANDU: According to a report issued by the Public Debt Management Office under the Ministry of Finance, as of the end of the fiscal year 2023–2024, the entire amount of government outstanding debt has increased to Rs. 2,433.23 billion. This represents a significant increase over the prior fiscal year and illustrates the government's increasing reliance on borrowing from both local and foreign sources.

Debt Dissection

Of the entire debt, the amount owed abroad is 1,252.33 billion, and the amount owed domestically is 1,180.90 billion. This breakdown demonstrates a virtually similar distribution of funding from foreign and internal sources, with external debt making up 51.47% and domestic debt accounting for 48.53% of the total amount of outstanding debt.

Yearly Rise

According to the report, the public debt rose by Rs. 134.68 billion in just the previous fiscal year. The total amount of public debt at the end of the preceding fiscal year, 2022–2023 was Rs. 2,299.35 billion. A 7% increase in external debt and a 4.5% increase in domestic debt account for the 5.53% growth in the total amount of outstanding debt during the fiscal year 2023–2024.

Further Borrowing and Payback

The government secured an additional Rs. 358.02 billion in loans during the previous fiscal year. This comprises 123.60 billion from outside sources and 234.42 billion from within. Even with the higher borrowing, the government only collected 79% of the debt it was supposed to.

The government's ambitious goal of earning Rs. 452.75 billion to close the budget deficit for the current fiscal year has been established. This goal entails borrowing Rs. 212.75 billion from outside sources and Rs. 240 billion from home sources.

The government has made principle payments on these loans totaling Rs. 305.37 billion as repayment. Out of this total, 255.25 billion were loans from within the country, and 49.99 billion came from outside. The study also states that in the most recent fiscal year, the government paid principle and interest using 92.54% of the whole budget.

Allocating the Budget and Managing Debt

The government had allocated Rs. 330 billion for financial management in the last fiscal year. Domestic debt mainly comprises short-term and long-term securities issued in the domestic market, as well as loans borrowed from the central bank.

Ratio of Debt to GDP
The total debt-to-GDP ratio is 42.65% as of mid-July 2024. This comprises a 21.95% external debt-to-GDP ratio and a 20.70% domestic debt-to-GDP ratio. In contrast, the debt-to-GDP ratio at the end of the fiscal year 2022–2023 was somewhat higher at 42.73%, with domestic debt at 20.98% and external debt at 21.75%.

Origins of Debt from Outside Sources

With 48.93% of the government's outstanding external debt, the International Development Association (IDA) is the largest shareholder. The Asian Development Bank (ADB), with a 32.54% holding, comes next. Together, these multilateral organisations hold 89.07% of the external debt, with bilateral organisations holding the remaining 10.93%.

Implications and Prospects for the Future

The government's difficulties in striking a balance between budgetary management and economic growth are highlighted by the rising levels of debt. The necessity for strategic financial planning to properly manage the debt burden is indicated by the reliance on borrowing, both from local and foreign sources.

The government's financial situation will largely depend on whether it can fulfil its aggressive borrowing goals for the current fiscal year. Upholding sustainable debt levels and effectively employing borrowed funds are crucial for preserving economic stability and promoting expansion.