…to surge by 43 percent in FY 2025-26

Thukten Zangpo 

The country’s debt is estimated to surge by 12 percent to finance the fiscal gap and hydropower loans in this fiscal year 2024-25, the finance ministry has estimated.

In absolute figures, the debt is estimated debt at Nu 319.07 billion compared with the previous fiscal year’s debt of Nu 285.18 billion.

In terms of the debt to gross domestic product (GDP) ratio, it is expected to slightly decrease to 105.9 percent of GDP from 107.5 percent from the previous fiscal year.

The ministry stated that the anticipated increase in the national debt is mainly attributed to expected loan disbursement from the World Bank and Asian Development Bank for small hydropower projects scheduled to be started in this fiscal year.

In the fiscal year 2024-25, there will be an increase of Nu 8.78 billion in domestic debt to Nu 30.26 billion while an increase of Nu 25.11 billion in external debt to Nu 288.81 billion.

Hydro debt will rise by Nu 9.55 billion to Nu 176.75 billion and non-hydro debt will surge by Nu 15.55 billion to Nu 112.06 billion.

For this fiscal year, 90.5 percent of the national debt will be external, while 9.5 percent is domestic debt. In the next fiscal year, 2025-26, the national debt is projected to increase by an additional Nu 890.59 billion to Nu 408.66 billion to cover budgetary deficits and hydropower borrowing needs, compared to the estimated debt for this fiscal year.

Over the medium term, the finance ministry stated that both the external debt and the domestic debt are projected to increase on account of additional hydropower disbursements and budgetary borrowings to meet the financing gap.

As of September last year, the national debt was reported at Nu 290.3 billion, equivalent to 95.2 percent of the country’s GDP.

External debt accounted for Nu 266.66 billion and Nu 23.6 billion in domestic debt largely due to the government issuing treasury bills worth Nu 2.5 billion.

Hydropower-related debts from six major projects—Mangdechhu, Puna-I, Puna-II, Nikachhu, Dagachhu, and Basochhu was recorded at Nu 166.97 billion, making up 62.6 percent of total external debt.

Non-hydro debt, however, rose by 3 percent to Nu 99.69 billion, comprising 37.4 percent of external liabilities.

INR-denominated debt (64.6 percent of external debt) was recorded at Nu 172.37 billion while convertible currency debt stood at USD 1.13 billion or Nu 94.29 billion.

The finance ministry estimates that debt servicing will account for 21.8 percent of domestic revenue in the fiscal year 2024-25, remaining within the 35 percent threshold set by the Public Debt Management Policy 2023.