Nepal prepares legislation to enable govt raise foreign currency debt for first time

Kathmandu, July 18 (SocialNews.XYZ) The Nepali government has prepared a draft amendment to the Public Debt Management Act that would allow it to issue government debt instruments denominated in foreign currency for the first time.

“The Public Debt Management Office may issue government securities, through auction or other prescribed methods, denominated in either domestic or foreign currency, in a manner that allows them to be purchased by domestic or foreign individuals or entities,” the draft bill states.

The proposed provision would enable the Nepali government to raise debt from international capital markets to meet the country's growing financing needs.

“It is aimed at opening the door for raising public debt from the international market,” a senior official at the Public Debt Management Office told IANS. “It is an international practice, and we are preparing to follow it.”

Nepal has not yet raised public debt from the international market through the issuance of market-based debt instruments. Instead, the country has received the majority of its external loans from multilateral development partners such as the World Bank and the Asian Development Bank (ADB), as well as from bilateral donors.

More than 91 per cent of Nepal's external debt from multilateral lenders is owed to the World Bank and the ADB, while bilateral creditors account for 9.16 per cent of the country's external debt.

Loans from the World Bank and the ADB have been extended on highly concessional terms, with interest rates of up to 1.5 per cent. However, there is a limit to the amount of concessional financing available from these institutions. At the same time, domestic borrowing has been relatively expensive.

As of mid-June 2026, during the fiscal year 2025–26 that ended in mid-July, domestic debt accounted for 46.51 per cent of Nepal's total public debt, while the remaining 53.49 per cent was external debt, according to the Public Debt Management Office.

Although domestic debt is slightly lower than external debt in terms of outstanding stock, the government spends significantly more on servicing domestic borrowings because of higher interest rates and shorter repayment periods.

In the fiscal year 2025–26, the Nepali government allocated NPR 67.45 billion for the repayment of external debt, compared with NPR 343.55 billion for domestic debt servicing.

According to the Public Debt Management Office, Nepal's total public debt stood at around 45 per cent of the country's Gross Domestic Product (GDP) as of mid-June 2026.

Source: IANS