Nepal's public debt exceeds Rs 3 trillion as servicing costs rise

Nepal’s total public debt has surpassed the Rs 3 trillion mark for the first time, reaching Rs 3.009 trillion by the end of the first quarter of the current fiscal year, according to the Public Debt Management Office. That is up from Rs 2.981 trillion at the end of the previous fiscal year in mid-July 2026.

Data from the Public Debt Management Office, as reported by Onlinekhabar and Gorkhapatra, indicates that the debt burden now averages more than Rs 100,000 per Nepali citizen. The total debt currently stands at 45.59 percent of the country’s gross domestic product (GDP). Of this, domestic debt accounts for Rs 1.410 trillion (46.87 percent), while external debt makes up Rs 1.598 trillion (53.13 percent).

Rising debt-servicing pressure

Government spending on debt servicing has become a significant fiscal challenge. In the first three months of the fiscal year, the government paid Rs 98.87 billion in principal and interest, according to the Public Debt Management Office. Onlinekhabar English noted that this is far more than the Rs 28.42 billion the government spent on capital expenditure in the same period, according to the Financial Comptroller General Office. The Office of the Auditor General has raised concerns over this trend, warning that public resources are increasingly absorbed by debt liabilities rather than by investment that could expand the economy’s productive capacity.

The National Natural Resources and Fiscal Commission has recommended strictly prohibiting the use of domestic loans for recurrent or administrative expenses. The commission says borrowing should go to projects that create jobs, deliver long-term benefits and contribute to capital formation.

Economic context and concerns

Public debt has more than doubled over the past decade, from Rs 1.433 trillion in fiscal year 2019/20, according to Ministry of Finance figures. Economists cited by Onlinekhabar English argue that borrowing is not necessarily risky when the money goes into productive projects that earn enough to repay it, but concern is growing that Nepal has not consistently directed borrowed funds that way. A high-level Economic Reform Recommendation Commission formed by the government in 2024 warned in its report that the country’s chances of falling into a debt trap would rise if public debt is not used properly and fails to generate returns.

The government has set a target of mobilising Rs 658.28 billion in public debt this fiscal year; by mid-October it had raised Rs 123.32 billion, 18.73 percent of that goal.