Let’s talk about something that impacts every one of us, even though it doesn’t always grab the headlines—Nepal’s growing public debt. Now, I know “public debt” doesn’t exactly sound like the most exciting topic, but trust me, the numbers behind it are a big deal. Picture this: as of the first quarter of this fiscal year, Nepal’s total debt has skyrocketed to Rs 2.523 trillion. Yes, trillion. If you’re wondering what that means in the grand scheme of things, it’s around 44.23% of our entire economy, or GDP.

To put it simply, for every 100 rupees Nepal generates in value, we owe over 44 rupees in debt. That’s a pretty significant chunk, and it’s the highest we’ve seen in nearly two decades.

So, what does this all mean for the average Nepali? Let’s break it down

Breaking Down the Numbers

According to the Public Debt Management Office, the government borrowed Rs 136.31 billion  in the first three months of this fiscal year. Out of that, Rs 115 billion came from domestic borrowing, and Rs 21.31 billion was from external sources. Now, we all know that borrowing is sometimes necessary, but here's where things get tricky: the government did manage to repay Rs 69.03 billion during the same period, but despite that, our debt still went up by Rs 88.93 billion. That’s like trying to pay off your credit card, but the balance just keeps growing.

Currently, our GDP stands at Rs 5.704 trillion, and the debt-to-GDP ratio—basically how much we owe compared to what we make—is now at 44.23%. This is the highest it’s been in 18 years. To give you some context, back in 2005/06, it was even worse at 49.52%. But then, over the years, the government managed to bring it down to 22.28% in 2014/15. So what happened?

Well, one major event was the 2015 earthquake. Since then, we’ve had to borrow more to rebuild and recover, which is understandable. But what’s not so great is that this number has kept climbing. In fact, in just the past decade, it’s grown five-fold.

Why Does This Matter?

You might be thinking, “Okay, so the government owes money. How does that affect me?” Here’s the thing—when the government borrows a lot, it has to pay back a lot, too. And that repayment doesn’t come from some magic vault; it comes from the budget. This year, the government has set aside Rs 402 billion just for loan repayments. That’s over 21% of the entire national budget, and it’s Rs 50 billion more than what’s being spent on capital expenditures for building infrastructures like roads, schools, and hospitals.

Higher debt also means the government might have to raise taxes or borrow even more just to keep up with repayments, which leads to something economists call the "crowding out" effect. Here’s a simple way to understand it: when the government borrows a lot to keep up with public expenditure or debt repayments, it uses up a big portion of the money available in the economy. This leaves less for businesses and individuals to borrow. So, instead of businesses getting loans to invest and grow, the government takes the lion's share, which can slow down economic progress. And when future generations inherit this debt, they might face higher taxes and fewer resources to build a prosperous future.

What’s Causing This?

The government is struggling with slow revenue collection, with only 17.49% of annual target being collected in the first quarter of the current fiscal year. This could be part of the reason  why borrowing has shot up. But let’s be real—revenue collection isn’t the only issue here. In most cases, a lot of the debt comes from or results in unproductive spending. Think of it like someone borrowing to buy a luxury car instead of investing in something that grows their wealth. Sure, it’s fun for a while, but it’s not exactly sustainable.

This year alone, the government is planning to borrow Rs 547 billion just to meet its obligations. If this trend continues, we’re looking at a serious debt problem down the road.

Is There a Way Out?

So, what’s the solution? It’s not all doom and gloom. There are some ways the government could get a handle on this debt situation before it spirals out of control:

1. Cutting Unproductive Spending: The government needs to take a long, hard look at where the money is going. By cutting down on wasteful spending and redirecting funds to more productive sectors, we can make sure the money we borrow is put to good use.
2. Improving Revenue Collection: A more streamlined tax system could help increase revenue without having to borrow so much. Tax leaks and inefficiencies are a big part of the problem.
3. Better Debt Management: Not all debt is bad—if it’s invested wisely, it can lead to growth. The government could also explore public-private partnerships, reducing the need for excessive public borrowing.
4. Focusing on Growth: At the end of the day, the best way to reduce debt is through economic growth. If the borrowed money is invested in ways that boost GDP, then the debt becomes more manageable.

So, What Next?

Let’s be honest—the rising debt is a bit alarming, but it’s not a problem that can not be solved. The real question we should be asking is: Is the borrowed money being used wisely? Borrowing isn’t inherently bad, but when it’s mismanaged, it leaves future generations with the bill.

Right now, the debt-to-GDP ratio at 44.23% is a warning sign. We need to start holding the government accountable for how they’re managing this debt. Every rupee borrowed should be contributing to the country’s long-term growth, not just plugging short-term holes in the budget.

If things keep going the way they are, Nepal might have to make some tough choices in the future—do we keep borrowing and risk falling into a debt trap, or do we take a step back, reassess our spending, and focus on sustainable growth?

One thing’s for sure: the time to act is now, before we find ourselves in a situation where debt becomes an anchor dragging the country down.