Public debt rises to NRs 2.72 trillion as exchange losses persist

Nepal’s total public debt has climbed to NRs 2.72 trillion as of mid-October 2025, marking an increase of about NRs 50.6 billion in the first three months of the ongoing fiscal year 2025/26 (2082/83), according to the latest Government Debt Statistics published by the Public Debt Management Office (PDMO).

That brings the country’s debt load to around 44.6% of GDP—a gradual rise from 43.71% at the end of FY 2024/25.

Exchange losses 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 during the review period produced an exchange loss of NRs 40.3 billion, inflating the local-currency value of Nepal’s foreign obligations even without new disbursements.

Because most external loans, about 73%, 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. By mid-October, total external debt reached NRs 1.45 trillion, accounting for 53% of total public debt.

The SDR is an international reserve asset created by the IMF in 1969 to supplement the official reserves of its member countries. The SDR is not a currency. It is a potential claim on the freely usable currencies of IMF members. As such, SDRs can provide a country with liquidity. A basket of currencies defines the SDR: the US dollar, Euro, Chinese Yuan, Japanese Yen, and the British Pound.  One SDR is roughly equivalent to $1.4, though the value fluctuates daily as exchange rates shift. Source: International Monetary Fund

Borrowing continues, mostly domestically

During the first quarter, the government mobilised nearly NRs 101 billion in new debt—about NRs 11 billion externally and NRs 90 billion through domestic securities. The government repaid NRs 90.51 billion in principal, including NRs 10.36 billion externally and NRs 80.15 billion domestically.

Outstanding domestic liabilities reached NRs 1.28 trillion, made up mainly of Development Bonds and Treasury Bills, with smaller shares held in Citizen Savings Bonds and Foreign Employment Savings Bonds.

Debt service obligations surge to NRs 110 billion

Debt servicing has continued to weigh on the budget.

By mid-October, the government had already spent nearly NRs 110 billion on debt servicing—comprising NRs 90.5 billion in principal repayment and NRs 19.38 billion in interest and discount payments—accounting for 1.8% of total government expenditure. 

Domestic debt service alone accounted for NRs 16.3 billion in interest payments, largely on Development Bonds and Treasury Bills.

Multilateral lenders dominate the external portfolio

Among external creditors, multilateral institutions continue to hold about 90% of Nepal’s foreign debt.

The International Development Association (IDA), the concessional arm of the World Bank Group, accounts for nearly 49% of the external portfolio, followed by the Asian Development Bank (ADB) at roughly 33% (combined SDR and USD commitments).

Bilateral lenders such as Japan’s JICA, China’s EXIM Bank, and South Korea’s EDCF collectively make up the remaining 10%.

Borrowing targets lag, reflecting slow disbursement

The government aims to mobilise NRs 595.7 billion in total debt this fiscal year. Of them, NRs 362 billion domestically and NRs 233.7 billion externally.

By mid-October, it had achieved nearly 17% of that target, with progress of 25% in domestic borrowing but just 4.6% in foreign disbursement—reflecting slow project implementation and low absorption capacity.

Debt structure and fiscal outlook

Domestic debt now represents 47% of total public debt, while external debt accounts for 53%. The balance between both sources has remained stable, but the exchange-rate sensitivity of the external portion continues to expose Nepal to increased loan amounts.