Kathmandu: The Government of Nepal successfully raised the entire target of internal debt for the fiscal year 2024/25, but fell significantly short in mobilizing external debt, securing only 57.79% of the projected amount.

According to the latest report released by the Public Debt Management Office, the government had set an internal debt target of Rs 330 billion, which was fully achieved. In contrast, only Rs 125.3 billion was raised from external sources against the annual target of Rs 217 billion, resulting in a shortfall of Rs 91.6 billion.

Speaking on the shortfall, Gopikrishna Koirala, Chief of the Public Debt Management Office, pointed to insufficient capital expenditure and project delays as key contributing factors.

“Due to the underutilization of capital expenditure and delayed project implementation, we were unable to generate the necessary disbursement requests to the foreign lenders, which led to lower-than-expected external borrowing,” said Koirala.

He clarified that most external loans are structured as reimbursement-based, where disbursements are made after the government utilizes internal resources to initiate projects.

“Since many of these projects failed to progress as planned, the disbursement claims to external lenders were also delayed or underutilized,” he added.

While internal debt tends to carry higher interest rates and shorter repayment tenures, it is often used to finance recurrent expenditures. On the other hand, external debt—despite longer repayment periods and lower interest remains more development-oriented, as it is typically linked to specific capital projects and infrastructure development, as stipulated by lenders.

However, heavy reliance on internal borrowing can disrupt the financial and currency markets, as it reduces the availability of loanable funds for the private sector from banks and financial institutions.

Public Debt Snapshot: FY 2024/25

• Total Public Debt Target: Rs 547 billion
• Total Mobilized: Rs 455.39 billion (83.25% of the target)
• Total Public Debt Outstanding: Rs 2,669 billion
• Internal Debt: Rs 1,263 billion (22.14% of GDP)
• External Debt: Rs 1,401 billion (24.56% of GDP)
• Public Debt to GDP Ratio: 43.71%

As of mid-July 2025, foreign loans accounted for 52.49% of the total public debt, while domestic loans made up the remaining 47.51%.

Debt Servicing Expenditure
In the last fiscal year, the government spent over Rs 400 billion on debt servicing (principal and interest), representing 90.01% of the allocated debt servicing budget and 5.94% of the national GDP.

• Internal Debt Servicing: Rs 304 billion
• External Debt Servicing: Rs 58.40 billion

The rising debt obligations underscore the importance of efficient public investment, timely project execution, and prudent fiscal planning to ensure sustainable debt management in the coming fiscal years.

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