Debt Without Direction?

Public debt has been steadily rising in recent years, with growing concern that every Nepali effectively bears a share of this burden. Faced with limited domestic resources for development and infrastructure, the government has increasingly relied on both internal and external borrowing. As this trend persists, questions are mounting over the long-term trajectory of the economy. According to the Public Debt Management Office, Nepal’s total public debt liability had exceeded Rs 2.878 trillion by mid-March in the current fiscal year—equivalent to around 47 percent of the country’s gross domestic product (GDP). The increase of more than Rs 200 billion in just eight months underscores the accelerating pace of borrowing. Based on the 2021 population census, the per capita debt burden now stands at approximately Rs 98,691—close to Rs 100,000 per person. Borrowing, in itself, is not unusual. Most countries use debt to finance development, expand infrastructure and stimulate economic activity, and Nepal is no exception. However, as debt levels rise, concerns over its effective utilisation are becoming increasingly pressing. A key driver of rising debt is weaker-than-expected revenue collection. When economic activity slows, tax revenues inevitably fall short. At the same time, mounting recurrent expenditure—including salaries, administrative costs, social security payments, subsidies and other routine obligations—has placed significant strain on public finances. This leaves the government with little choice but to borrow to fund development initiatives.