Growing Debt, Slowing Reforms

With Nepal’s public debt crossing Rs 2,800 billion, the government stakeholders are required to address the situation sooner than later. Faced with rising expenses and limited income, the government turns to borrowing as the easiest option. At the same time, capital spending remains weak. Year after year, development budgets go unspent or are spent poorly. Delays in project completion because of poor planning and weak policies and poor administrative work processes have led to borrowed funds failing to create assets that could support future growth. A large share of public borrowing goes to recurrent expenses. Our annual national budget is eaten up mostly by recurring expenditures such as salaries, pensions, social security allowances, and interest payments. Unavoidable as they are, they are of no help for raising productivity or giving a boost to the economy. As the economy faces a rough time, debt keeps on rising without solid income to repay it. Meanwhile, external pressures also create a difficult situation. Similarly, the rise in inflation across the world and other factors, such as the rise in the dollar’s value, keep our debt increasing. An increase in the government’s domestic borrowing has also reduced credit for the private sector.