Alarming Debt Burden

Nepal’s public debt is mounting alarmingly, with the government spending nearly Rs 362.59 billion in the last Fiscal Year 2024/25 solely on repaying the principal and interest of domestic and foreign loans. This staggering figure is more than the entire national development budget, which stood at Rs 352.35 billion. The country now faces a perilous situation where debt servicing consumes a large portion of its resources, leaving insufficient funds for productive development work. Financial challenges are intensifying further amid rising interest rates, notably from major development partners like the World Bank, which recently doubled its lending rate to Nepal—from 0.75% to 1.5%. This increase, reflecting Nepal’s improved economic status, is set to inflate the costs of many ongoing development projects heavily reliant on such financing. Consequently, the portion of the national budget earmarked for interest payments will only grow, placing further strain on the national economy.