Govt Meets Internal Debt Target, External Borrowing Falls Short at 57%

The Government of Nepal met its entire internal debt target for Fiscal Year 2024/25 but managed to raise only 57 percent of the external borrowing goal, according to the Public Debt Management Office.

The report shows that the government successfully collected the full Rs 330 billion targeted for internal borrowing. However, only Rs 125.3 billion of the Rs 217 billion external debt target was secured, leaving a shortfall of Rs 91.6 billion.

Chief of the Public Debt Management Office, Gopi Krishna Koirala, attributed the shortfall in external borrowing to low capital expenditure and delays in project completion.

“Since capital expenditure remained insufficient and many projects were not completed on time, we could not optimally raise all the external debt,” Koirala said. He added that annual projects and programs are first funded through internal resources and later reimbursed by lenders. “Because projects were not executed on schedule, we could not request full reimbursement, which kept the actual external borrowing low.”

While external loans carry lower interest rates and longer repayment periods, internal borrowing is often used for recurrent expenditures. In contrast, external debt is considered more effective as it is tied to capital projects, with lenders requiring funds to be spent on infrastructure and development initiatives aimed at capital formation.

During FY 2024/25, the government had set a target of mobilizing public debt of Rs 547 billion. Of this, Rs 455.39 billion was mobilized, meeting 83.25 percent of the goal.

By the end of the fiscal year, the country’s total public debt had reached Rs 2,669 billion, an increase of Rs 231 billion over the previous year, equivalent to 43.71 percent of the country’s Gross Domestic Product (GDP). Foreign loans accounted for 52.49 percent of the total debt, while internal loans made up 47.51 percent.

As of mid-July 2025, internal debt stood at Rs 1,263 billion (22.14 percent of GDP), and external debt amounted to Rs 1,401 billion (24.56 percent of GDP).

The government spent over Rs 400 billion on debt servicing in FY 2024/25, covering both principal and interest payments. This represented 90.01 percent of the allocated annual budget for debt servicing and 5.94 percent of GDP. Of the total amount, Rs 304 billion went toward internal debt repayment and Rs 58.40 billion toward external loans. -- RSS