KATHMANDU: Nepal’s economy is facing mounting structural stress, with the government’s consolidated fund remaining in deficit and public debt rising sharply over the past decade, according to the latest economic situation paper.
Finance Minister Swarnim Wagle has highlighted that the federal government’s consolidated fund is still in deficit, with a shortfall of around Rs 117 billion as of April. At the same time, more than Rs 400 billion in payment liabilities remain pending, adding pressure on future budgets.
The report shows that public debt has more than doubled in the last 10 years, reaching 43.8 percent of GDP. A growing share of government revenue is now being consumed by debt servicing, leaving limited fiscal space for development expenditure.
Officials warn that rising debt obligations are becoming increasingly difficult to manage as repayment costs continue to climb.
The paper also highlights weak fiscal discipline, noting that public financial irregularities have exceeded Rs 700 billion. This reflects persistent governance challenges in expenditure management and oversight.
Despite Nepal’s federal structure, revenue contribution from provincial and local governments remains below 10 percent, limiting domestic demand stimulation and slowing economic momentum.
In addition, declining foreign aid—particularly grants—and increasing reliance on loans are further tightening fiscal conditions.
While the banking system currently holds excess liquidity, credit growth remains sluggish due to weak private sector investment demand.
Economists say the combined impact of rising debt, weak investment activity, and structural inefficiencies signals a growing long-term challenge for Nepal’s economic stability unless urgent reforms are introduced.
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