As the government’s struggle to collect revenue as targeted continues even in the current fiscal year (2023–24), it incurred over 40 percent of the total planned domestic debt in the first quarter.

According to the Public Debt Management Office (PDMO), the government raised as much as Rs97.31 billion in domestic debt during the first quarter of the current fiscal. This accounts for 40.5 percent of the total domestic loans planned to be raised in the current fiscal.

The government aims to take a total of Rs240 billion in domestic loans this fiscal.

As per the initial domestic debt schedule, the government had targeted to borrow only Rs55 billion during the first quarter.

“The government’s need for resources forced us to raise more internal loans in the first quarter than we had initially planned,” said Dilaram Giri, officiating chief at the PDMO. “Likewise, it was also an opportunity for the government to collect debt at a lower interest rate amid excess liquidity in the banking system.”

The bank and financial institutions face an excess liquidity situation because of lower loan demands amid an economic slowdown. In October, the World Bank predicted that Nepal stared at a situation of lower growth and high inflation.

Given the borrowing scenario, the PDMO on Tuesday published a new internal debt raising schedule with necessary adjustments.

The government will raise Rs31 billion in the ongoing second quarter, down from the planned Rs53 billion. Rs47.69 billion and Rs64 billion will be raised in the third and fourth quarters, respectively.

Earlier, the PDMO had planned to raise Rs53 billion and Rs77 billion in the third and fourth quarters, respectively.

Nepal’s overall public debt has soared since the country had to borrow more for reconstruction after the 2015 earthquake. The debt burden further rose as the country fought the problems caused by Covid-19 pandemic.

As of the first quarter of the current fiscal, the country’s total outstanding debt stood at Rs2.34 trillion. Of the total, Rs1.18 trillion is domestic and Rs1.15 trillion external debt.

The government has been spending huge sums of money in repaying debt in recent years. In the last fiscal year (2022-23), the government spent Rs 222.74 billion in debt servicing, including principal repayment and interest. The figure is a rise of around 83 percent from the previous fiscal, according to the Public Debt Management Office. The spending under the heading was Rs121.99 billion in the fiscal year 2021-22. In the fiscal 2020-21, the government spent Rs95 billion in debt servicing.

According to the budget for the fiscal year 2023-24, the government will be spending as much as Rs330.55 billion in repaying loans, more than the capital budget. The government has allocated Rs302 billion for capital spending.

One factor behind the growing debt liability is high interest rates offered by the government while borrowing, said Giri. In fact, the government had allocated an extra Rs22 billion in the last fiscal budget to repay loans, according to the PDMO.

Giri of the PDMO said his office received an extra Rs22 billion last fiscal year from the finance ministry to pay back the debt. “I think, the allocation this fiscal year will be enough for debt servicing,” he said.