Govt to allocate around 25 percent of the annual budget for interest and principal repayments in FY 2024/25

KATHMANDU, April 3: The government is preparing to allocate Rs 436 billion to pay the interest and for the repayment of the principal on public debt for the next fiscal year.

The allocated fund under the heading will be an excess of Rs 106 billion compared to the amount being exhausted in the current fiscal year. In the budget for the FY 2023/24, the government announced to spend as much as Rs 307 billion in repaying loans. However, the amount to be spent in debt servicing this year is expected to cross Rs 330 billion, way higher than the government’s projected amount.

After the National Planning Commission (NPC) set the ceiling of the annual budget for the next fiscal year at Rs 1.80 trillion, the government has been facing criticism for allocating an exorbitant budget amid slow revenue collection. Prime Minister Pushpa Kamal Dahal is reported to have exerted pressure over the authorities concerned to increase the size of budget for the next fiscal year.  

NPC Vice-chairman Min Bahadur Shrestha however said that the actual budget allocation of the government will only be Rs 1.694 trillion to be utilized by various government bodies for their purposes. “Although the budget ceiling seems to have increased by Rs 49 billion, its actual funds allocation has been lowered by Rs 57 billion,” said Shrestha, speaking at a Development, Economic Affairs and Good Governance Committee meeting under the National Assembly on Tuesday.

Amid surging public borrowing due the exorbitant government expenditure and low revenue collection, the government has been compelled to allocate a notable amount for debt servicing in recent years. The government spent Rs 222.74 billion in debt servicing, including principal repayment and interest, in the fiscal year 2022-23. The figure is a rise of around 83 percent from the previous fiscal year, according to the Public Debt Management Office (PDMO).

The spending in debt servicing was Rs 121.99 billion in the fiscal year 2021/22. In the FY 2020/21, the government spent Rs 95 billion under this heading.

The PDMO data shows that Nepal's public debt has surged to Rs 2.388 trillion up to Falgun (mid-March) of the current FY 2023/24. Of the amount, the government's current internal debt liability stands at Rs 1.185 trillion, whereas its external debt liability is Rs 1.202 trillion.

In the last eight months of the current FY, Nepal has accumulated an additional loan of Rs 218.86 billion. In the review period, the government has repaid Rs 146.64 billion of internal debt and Rs 28.86 billion of external debt. 

 
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