Amid limited financial resources and mounting liabilities, the National Planning Commission (NPC) has estimated that the government will need to repay over Rs 400 billion in principal and interest on public debt in the upcoming fiscal year (FY 2025/26).
As part of its pre-budget consultations with various ministries, agencies, and stakeholders, the NPC has highlighted rising debt liabilities in a recent public report. It noted that mandatory expenditures—including salaries, pensions, and gratuities—are increasing, requiring additional financial resources.
According to the Public Debt Management Office, the government borrowed Rs 366.69 billion during the first nine months of the current fiscal year. This has pushed the total public debt to Rs 2,667.26 billion, which now stands at 46.75 percent of the country’s gross domestic product (GDP).
Out of the Rs 402.85 billion allocated for loan and interest repayments in the current fiscal year, Rs 252 billion had been paid by mid-April. Of this, Rs 233 billion was paid toward principal and Rs 49.45 billion toward interest.
The NPC report warns that growing obligations will limit the government’s ability to invest in other priority areas such as infrastructure reconstruction, social security, and health insurance. “The budget share for programs with historically low capital expenditure should be significantly reduced,” the report recommends. “Based on an analysis of sick and incomplete projects, funding should only go to projects ready for implementation, while others should be postponed or canceled.”
It also calls for a reassessment of financial transfers to provincial and local governments to ensure alignment with actual revenue mobilization.
Amid tight resource availability and increasing fiscal pressure, the report emphasizes the need for a results-oriented budget. It directs ministries to propose programs in line with the Sixteenth Plan’s long-term vision and transformational strategies, with priority given to projects that promote production, productivity, and employment.
The NPC has also stressed the importance of accurate budget estimates, effective liability management, and elimination of duplicate projects. It has urged proper coordination between federal, provincial, and local levels, including fair distribution of conditional grants.
The report further underscores the need for stronger political commitment, better policy coordination, and greater utilization of existing institutional mechanisms rather than creating new structures. It notes that many ministries have had to reallocate resources due to budget shortages for their mandatory responsibilities.
Looking ahead, the commission has warned that resource constraints will remain a serious challenge, with modest revenue growth, a decline in foreign grants, and delays in mobilizing foreign loans.
