Kathmandu. The public debt of the country has exceeded 30 trillion in the last three months of the formation of the government of Balendra Shah led by the RSVP. According to the Public Debt Management Office, in the first quarter (July-August) of the current financial year 2083/84, the public debt reached its highest point and touched the figure of 30 trillion. Until the end of the last year 2082/83, i.e. until June 2083, the public debt was equal to 29 trillion 81 billion.
In the first three months of the current year, the government has borrowed 1 trillion 23 billion rupees. During this period, 77 billion 74 million worth of debt has been paid. During this period, due to the exchange rate, there was a profit equal to 18 billion 16 billion, and the overall outstanding debt reached 30 billion 9 billion 11 billion. Out of this, the internal debt has reached 14 trillion 10 billion and the external debt has reached 15 trillion 98 billion, according to the office.
In Nepal’s public debt, the share of internal debt is 46.87 percent and the share of external debt is 53.13 percent. When the 30 billion public debt is divided by the population, the debt burden of each Nepali has reached more than 1 lakh rupees.
According to the office, compared to the gross domestic product (GDP) of Nepal, the public debt base has reached 45.59 percent. Out of this, internal debt is 21.37 percent and external debt is equal to 24.22 percent, according to the data of the office.
6.5 trillion loan target, 18.77 percent progress
In the current fiscal year, the government has set a target of taking public debt equal to 6 trillion 58 billion 28 billion. Out of that, 1 trillion 23 billion 32 billion loans have been mobilized within the first quarter period. Which is 18.73 percent progress compared to the annual target.
The government has set a target of raising 4 trillion 10 billion domestic debt in one year. 1 billion has been mobilized by the end of October. Which is 24.39 percent of the target. While the target of raising external debt equal to 2 trillion 48 billion 28 billion has been set, only 23 billion 32 billion has been mobilized. Which is 9.39 percent of the annual target.
The government mobilized loans worth 23.84 billion in July, 38.10 billion in August and 61.37 billion in October. During the first three months, the government has spent Rs 1 trillion on loan interest payments. According to the office, 98.87 billion 35 million has been spent on principal and interest payments till October.
This year, the government has allocated 4 trillion 17 billion 88 million to spend on debt service. By October, 23.66 percent of the target has been spent. This year, the government has already spent 77.74 billion in principal payments and 21.12 billion in interest payments.
Principal payment of internal debt is equal to 65.10 billion and interest payment is equal to 17.63 billion. It has spent 12.64 billion in principal payment of external debt and 3.49 billion in interest payment.
In the first three months, the government had to spend much more on debt repayment than infrastructure development. According to the Comptroller General’s Office, until the end of October, the capital expenditure was only 28.42 billion.
As the government spends more on debt service compared to capital expenditure, it seems that it spends more on liability management compared to the productivity of the government. Which has been raised as a serious concern in the 63rd report of the Auditor General.
Experts consider the current public debt situation of Nepal to be a situation where the country has become a debtor without being rich. Comparing it to a person’s life is getting stuck in the quagmire of having to borrow again to repay the loan. Now the situation of the country has become the same.
According to the data of the Ministry of Finance, public debt has more than doubled in the last decade. By the year 2076/77, the debt burden of the country was only 14 trillion 33 billion 40 million. Since then, the debt has increased exponentially and now exceeds 30 billion. Public debt, which was only 38.05 percent of GDP seven years ago, has now increased to over 45 percent.
According to experts, choosing productive and capital-increasing projects, there is no risk even if you take a loan equal to GDP if you are able to repay the loan from investment returns. However, that has not happened in Nepal.
The report of the High-Level Economic Reform Suggestion Commission established by the government in 2081 stated that as the GDP and revenue mobilization did not increase as the public debt structure increased, the interest payment ratio increased.
The National Natural Resources and Finance Commission has recommended to strictly prohibit the use of internal debt for current and administrative expenses. The Commission has made this recommendation while setting the internal debt limit that can be taken by the union, state and local levels for the current year. Like every year, the commission has been setting a limit for the federal government to mobilize internal debt so that it does not increase to 5.5 percent of the GDP for the next year as well.
In the same context, while giving suggestions for internal debt mobilization, the commission has said to strictly prohibit administrative and current expenses. “The use of internal debt should be allocated for projects that can create employment opportunities, provide long-term benefits and contribute to capital formation, and strictly prohibit current and administrative expenses,” the commission said.
The 63rd annual report of the Office of the Auditor General also stated that public debt was not spent on capital formation. Questions have been raised saying that such amount has been spent on current topics such as staff expenses, services and consultancy and office operations.
According to the General Account, the debt structure has become sensitive due to external monetary effects. With a view to deploying financial instruments that can manage exchange risks in foreign currency, the General Accounting Office has suggested that loans be mobilized only in areas where productivity is achieved.