KATHMANDU, July 18: Although the size of the national budget has been increasing, the government's debt burden is also rising due to lower-than-expected revenue collection. In the fiscal year 2024/25, Nepal’s public debt increased by Rs 231.54 billion. This rise is mainly due to the government’s reliance on loans to fund development projects.
By the end of FY 2023/24, Nepal’s total public debt had reached Rs 2.43 trillion. This amount rose to Rs 2.66 trillion by the end of FY 2024/25. With limited capacity to cover regular expenses, the government has continued to take both internal and external loans for development and other expenditures. The failure to boost revenue collection has pushed the government to rely on such borrowings to prepare its annual budget.
According to Mukunda Pokhrel, information officer at the Public Debt Management Office, the government still needs to repay Rs 1.27 trillion in domestic loans and Rs 1.40 trillion in external loans.
Pokhrel said that over the past year, the government paid off Rs 281.63 billion in principal and Rs 70.11 billion in interest. With revenue falling short, the government has been managing development and other spending through loans. The gap between income and expenditure has led to the growing debt burden.
In recent years, Nepal’s public debt has surged significantly. Until FY 2018/19, the total debt (internal and external) stood at Rs 1.05 trillion. But by the end of FY 2024/25, it rose to Rs 2.66 trillion, showing a sharp increase in borrowings in recent years.
In FY 2019/20, the debt rose to Rs 1.43 trillion, with an increase of over Rs 300 billion in just one year. It further rose to Rs 1.73 trillion in FY 2020/21, and by FY 2022/23, the public debt grew by another Rs 250 billion. In FY 2023/24, the total debt reached Rs 2.29 trillion.
For FY 2025/26, the government has unveiled a budget of Rs 1.96 trillion. Out of this, the government plans to raise Rs 1.31 trillion in revenue, with the remaining amount to be covered through foreign grants, external loans, and domestic borrowing. Finance Minister Bishnu Paudel has proposed to borrow around Rs 600 billion in the current fiscal year.
The budget outlines a plan to take Rs 233 billion in foreign loans and Rs 362 billion in domestic loans. This shows that the government aims to borrow Rs 595 billion in total this fiscal year. The Ministry of Finance has said that due to insufficient revenue to meet public spending needs, there is pressure on financing, causing the debt to grow. The government also faces a challenge to reduce debt dependency by effectively managing external resources.
Revenue increased by Rs 120 billion
Although the government improved its revenue collection in FY 2024/25, it still missed the target. In one year, the government collected Rs 1.18 trillion in revenue, against a target of Rs 1.41 trillion—falling short by Rs 241 billion. However, compared to FY 2024/25, revenue increased by Rs 120 billion, marking an 11.33 percent rise.
In FY 2024/25, the total revenue collection stood at Rs 1.05 trillion. Despite various challenges such as disasters and global economic conditions, the revenue grew, said Uttarkumar Khatri, head of the Revenue Division at the Ministry of Finance. “We aim to meet our revenue target in the current fiscal year,” said Khatri.
The government has set a revenue collection target of Rs 1.31 trillion for FY 2025/26.