Internal debt fully raised, external debt falls short at 57%

By Hemanta Joshi, Kathmandu, July 30: While the government has succeeded in raising the entire targets of the internal debt for the last fiscal year 2024/25, it could only raise 57 per cent of the external debt.     

According to the Public Debt Management Office's report on public debt, the target of collecting Rs 330 billion for the internal debt was fully met.     

However, only Rs 125.3 billion was secured out of the target of Rs 217 billion of the external debt, which is just 57.79 per cent of the target, meaning the government could not raise the external debt equivalent to Rs 91.6 billion for the last fiscal year.     

Office's Chief Gopikrishna Koirala attributed factors such as low capital expenditure and delay in completion of projects to be the major reasons for the shortfall in meeting the target for the external debt.     

Koirala described, "Since capital expenditure is insufficient and many projects could not be completed on time, we could not optimally raise all the external debt."     

He further explained that the government's annual projects and programmes are initially funded by the internal resources and then reimbursed by the lenders.     

"Since the projects were not executed on time, we could not request full reimbursement from the lenders. That is why the actual external debt remained low."     

Comparatively, the interest rate of the external debt is lower than the internal debt, and the repayment period is also longer. Add to that, the government tends to indiscriminately spend the internal debt for recurrent expenditures.     

On the contrary, the external debt is considered more effective since this type of debt is tied to capital projects, and lenders stipulate that such funds are to be used for infrastructure or development projects, focusing more on capital formation.     

Likewise, when the government itself mobilises the loan that ought to be provided to the private sector through the bank and financial institution, it certainly leaves ripple effects in the financial and currency markets.     

In the last fiscal year, the government had set a target of mobilising Rs 547 billion in public debt. Of this, Rs 455.39 billion was successfully mobilised, achieving 83.25 per cent of the target.     

According to official data, by the end of the fiscal year, the government's total debt stood at Rs 2,669 billion, an increase of Rs 231 billion over the previous year. This represents 43.71 per cent of the country’s Gross Domestic Product (GDP).     

As of mid-July 2025, foreign loans constituted 52.49 per cent of the total public debt, while internal loans accounted for 47.51 per cent.     

The government presently owes Rs 1,263 billion in internal debt and Rs 1,401 billion in external debt.     

Relative to the GDP, internal debt represents 22.14 per cent, and external debt accounts for 24.56 per cent.     

During the last fiscal year, the government spent over Rs 400 billion on fiscal management by covering both principal and interest payments. This amounted to 90.01 per cent of the allocated annual budget for debt servicing and 5.94 per cent of the GDP.     

Of the total debt servicing expenditure, Rs 304 billion was spent on internal debt, while Rs 58.40 billion went for the repayment of the external debt. (RSS)