Nepal’s debt rises by over 7 percent in third quarter

Rupee depreciation has added Rs19.37 billion to the foreign debt burden. The value of US dollar has risen to a record high.

Nepal’s outstanding debt grew by 7.33 percent in the third quarter of the current fiscal year in the wake of continuous devaluation of the rupee against the dollar and costly domestic debt amid rising borrowing by the government.

Although the country received external debt only in limited amounts during the first three quarters of the current fiscal year, the debt liability in domestic currency terms surged due to the depreciation of the Nepali rupee.

Since the end of the second quarter, the value of external debts has risen by 2.89 percent to Rs976.45 billion while domestic debt increased by 12.72 percent to Rs 879.15 billion, according to the latest third quarterly report on public debt released by the Public Debt Management Office.

The country’s overall outstanding debt reached Rs1.85 trillion, or 38.25 percent of the GDP, as of mid-April, according to the report.

“Although the size of the debt is on the rise in recent years, Nepal’s debt to GDP ratio is still sustainable,” said Prakash Kumar Shrestha, chief of the economic research department at the Nepal Rastra Bank. “We can still absorb more debt. But to be able to repay the loans in the long term, we have to invest the debt money in productive sectors.”

According to the International Monetary Fund, Nepal witnessed a gradual decline in the debt to GDP ratio from 35 percent in the fiscal year 2011-12 to 25 percent in the fiscal year 2016-17, a sign of improving economic health. But after the country’s transition to fiscal federalism, Nepal’s public debt rose over the last several years with the ratio reaching 42.2 percent in the fiscal year 2019-20.

The substantial increase in debt in the fiscal year 2019-20 is driven by the impact of—and responses to—the Covid pandemic, according to the IMF.

SOURCE: NEWS AGENCIES