Dr. Karan Singh Thagunna/Dim Prakash Poudel
Department of Foreign Affairs, CPN(UML)
Desk: International Financial Institutions
Feb./March 2023
Nepal's Foreign Debt: Overview and Implications
Introduction
Nepal, a landlocked country located in South Asia, has been facing various economic challenges
in recent years, including high levels of foreign debt. The country's external debt has been
increasing steadily over the years, which has raised concerns about its ability to meet its debt
obligations and maintain financial stability.
In Least Developed Countries (LDC) like Nepal, there are limitations on raising revenue from
taxation due to the low levels of income of people, low levels of economic transactions, and a
possibility of increased burden on domestic economic entities. Therefore, public and external
debt is seen as a feasible option to finance government expenditure and development projects
for which the government lacks funds
In this article, we will provide an overview of Nepal's foreign debt, its implications, and the steps
that Nepal can take to manage its debt.
Overview of the public debt situation
Historically, Nepal has been borrowing domestically and internationally to meet its development
requirement; the Government of Nepal raised its first internal loan in 1951, and its first external
debt in 1963. The external loan is the highest source of deficit financing, followed by internal
debt and change in cash reserves, respectively.
Due to an increase in expenditure demands of post-earthquake reconstruction and federalism,
government borrowing has increased significantly in recent years. In five years to 2020/21, total
public debt increased by 148%. At the end of the fourth quarter of 2021/22, the total government
debt reached NPR 2,011.95 billion, out of which external debt consisted of NPR 1025.84 billion
and internal debt consisted of NPR 986.10 billion. External debt increased by 5.47% and internal
debt increased by 12.16% as compared to the third quarter.
Total external debt is debt owed to nonresidents repayable in currency, goods, or services. Total
external debt is the sum of public, publicly guaranteed, and private nonguaranteed long-term
debt, use of IMF credit, and short-term debt. Short-term debt includes all debt having an original
maturity of one year or less and interest in arrears on long-term debt.
According to the latest data from the Nepal Rastra Bank, Nepal's total foreign debt stands at
around USD 8.7 billion, of which around 69% is owed to multilateral agencies such as the World
Bank, Asian Development Bank, and International Monetary Fund. The remaining 31% is owed to
bilateral lenders such as China, India, and Japan.
The majority of Nepal's foreign debt has been used to finance infrastructure projects such as
hydropower plants, roads, and airports. These projects are expected to promote economic
growth and improve the standard of living in Nepal, but they also come with risks such as cost
overruns, delays, and potential environmental impacts.
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Nepal external debt for Sept. 2022 is $ 8.7 bn, a 3.75 % decrease from 2021.
Nepal external debt for 2021 was $8,855,972,582, a 12.01% increase from 2020.
Nepal external debt for 2020 was $7,906,177,633, a 21.38% increase from 2019.
Nepal external debt for 2019 was $6,513,481,342, a 18.19% increase from 2018.
Nepal external debt for 2018 was $5,510,938,186, a 11.03% increase from 2017.
Nepal's trade deficit, which occurs when the value of imports exceeds the value of exports, has
been a major contributor to the country's foreign debt. The country has a limited export base,
with exports accounting for only a small percentage of its GDP. This means that Nepal relies
heavily on imports to meet its domestic demand for goods and services, which has led to a high
trade deficit. In addition, Nepal's reliance on foreign aid and loans to finance its development
projects has also contributed to the country's increasing foreign debt.
The Outstanding debt data
The total public debt in Nepal reached 2,007.84 billion rupees at the end of the first quarter of
the fiscal year in October, 2022. Of this, Rs 1050.23 billion is foreign debt and Rs 957.61 billion
domestic debt.
During this period, the total outstanding debt of the Government of Nepal decreased by 0.27
percent. External debt increased by 2.37 percent, while internal debt decreased by 3.02 percent.
In the first quarter, total internal debt decreased by Rs 29.83 billion and external debt increased
by Rs 24.38 billion.
Receipts for payments on external debt totaled Rs 24.70 billion during the quarter, with principal
repayment at Rs 5.84 billion. There were no receipts for internal debt during the quarter, and
repayment for internal debt amounted to Rs 29.83 billion.
Other factors, such as exchange rate fluctuations, resulted in a foreign exchange loss of Rs 5.52
billion. At the end of first quarter of the fiscal year 2079/80 BS, the total debt to GDP ratio was
41.38 percent, with the external debt to GDP ratio at 21.64 percent and the internal debt to
GDP ratio at 19.73 percent.
In the last quarter of the fiscal year 2078/79 BS, the debt to GDP ratio was 41.49 percent, with
external debt at 21.14 percent and domestic debt at 20.35 percent. During the first quarter of
the fiscal year 2079/80 BS, the total receipt of debt was Rs 24.70 billion, all of which came from
external sources.
Of the external debt, 88.78 percent (Rs 21.93 billion) came from multilateral sources and the
remaining 11.21 percent (Rs 2.77 billion) came from bilateral sources. No debt was raised from
internal sources during the quarter. Rollover of treasury bills (domestic bonds) is not considered
new issuance.
In the first quarter of the fiscal year 2079/80 BS, the total debt service was Rs 50.62 billion, with
84.90 percent (Rs 42.98 billion) being internal debt and 15.09 percent (Rs 7.64 billion) being
external debt. For capital repayment, Rs 5.84 billion was paid to external creditors and Rs 29.83
billion was paid to internal creditors. The total capital repayment was Rs 35.68 billion. Interest
payments totaled Rs 14.94 billion, with Rs 1.79 billion paid to external creditors and Rs 13.15
billion paid to internal creditors. Commitment fees were also paid on external debt and
commissions on internal debt.
(Figure-1: Domestic Debt vs Foreign Debt)
According to a report from the Debt Management Office dated October 17, 2022, the
International Development Association (IDA), a part of the World Bank Group, is Nepal’s largest
creditor with Rs 526.01 billion, followed by the Asian Development Bank (ADB) with Rs 323.65
billion.
Nepal has also received credit facilities from the Japan International Cooperation Agency (JICA)
and the International Monetary Fund (IMF) in the amounts of Rs 48.41 billion and Rs 43.90 billion,
respectively. The Export-Import Bank of India has provided a loan of Rs 37.60 billion, the ExportImport Bank of China has provided a loan of Rs 33.51 billion, and the International Fund for
Agricultural Development has provided a loan of Rs 10.25 billion.
Nepal owes Rs 8.40 billion to the OPEC Fund for International Development, and has debts to the
Export-Import Bank of Korea and the European Investment Bank totaling Rs 5.63 billion and Rs
5.62 billion, respectively. The Saudi Arabian Fund is owed Rs 3 billion and the Finnish Nordic
Development Fund is owed Rs 1.82 billion. Nepal has maturing debts to Kuwait and Belgium in
the amounts of Rs 1.51 billion and Rs 0.60 billion respectively.
The European Economic Council, Natixis (a French bank), and the Asian Infrastructure Investment
Bank have debts due of Rs 0.20 billion, Rs 0.10 billion, and Rs 0.04 billion respectively, at the end
of the first quarter of the fiscal year 2079/80.
Per Capita external Debt.
Total Outstanding External Debt ( Oct. 2022)
Nepal Total Population ( 2078)
Per capita Debt
Total Family
Per Family Debt
NRS 1,050,299,900,000.00
29,192,480
NRS 35,976
5,643,945
NRS 186080.82
External Debt and List of the Creditors (Oct. 2022)
IFIs/Countries
World Bank ( IDA/IBRD)
ADB
JICA
IMF
AXIM Bank -India
AXIM Bank- China
IFAD
OFID
EUIB ( EU Investment Bank)
AXIM Bank- Korea
Saudi Arab Fund
NORAD Dev. Fund
Kuwait Loan assistance
Belgium Loan Assistance
European Economic Council
Natixis Bank- France
Asian-Infrastructure
Investment Bank-China
Outstanding Debt ( Nepali
currency in thousands)
526,011,800,000.00
323,649,000,000.00
48,413,400,000.00
43,895,300,000.00
37,566,300,000.00
33,512,800,000.00
10,254,400,000.00
8,383,300,000.00
5,615,500,000.00
5,628,500,000.00
3,030,000,000.00
1,818,500,000.00
1,505,700,000.00
573,600,000.00
195,300,000.00
139,500,000.00
37,000,000.00
Outstanding debt
( Percentage)
50.08539559
30.81696684
4.609790675
4.179589631
3.576959673
3.190996562
0.97639574
0.798234748
0.534692452
0.535930276
0.288508259
0.173152564
0.143368609
0.054616613
0.018595928
0.013282806
0.003523038
Nepal's total debt (
2021)
Outstanding foreign
debt ( %)
World Bank (
IDA/IBRD)
1%
1%
0%
31%
%
4%
4%
5%
50%
Foreign Debt
49%
51%
Internal Debt
(Figure-2: foreign vs internal debt)
31%
ADB
(Figure-3: outstanding foreign debt)
Foreign debt Partner’s Profile
Nepalese government has been receiving the foreign aids from multilateral and bilateral financial
agencies/countries. The Government has been directing the foreign support and aid as per the
guidelines of ministry of finance and national planning commission with the basis of national
priorities and policies. The foreign aid used in projects and programs is received in various forms
based on the principle of competitive advantage. Grants are mobilized primarily in the areas of
rural infrastructure development, health, education, drinking water, sanitation, sanitation and
other social sectors, and human development.
Nepalese government gets both concessional and non-concessional loans from bilateral and
multilateral development partners, but favors concessional loans in most circumstances. In terms
of foreign aid, the Nepalese government has accepted technical help, consultant mobilization,
and external volunteer mobilization
According to the nature of the external support, the following debt/ aid profile has been detailed.
Type
Multilateral
(
loan/g
rants)
Name
World
Bank
Profile
The World Bank Group is a
multilateral
financial
organization established in
July 1945. It was founded as
the International Bank for
Reconstruction
and
Development (IBRD) in 1944
at the Bretton Woods
Conference to provide loans
Major Aid support sector
1. Education
2. Policy and Strategic
3. Health
4. Energy
5. Road Transportation
1. Earthquake Housing Reconstruction Project (EHRP)
– IDA
2. The School Sector Development Program(SSDP)
Multilateral
(
Loans/
grants
)
Asian
Develop
ment
Bank(AD
B)
to
rebuild
countries
devastated by World War
II. The
World
Bank
comprises
two
institutions: the
International
Bank
for
Reconstruction
and
Development (IBRD),
and
the
International
Development
Association (IDA).
3. Strategic Road Connectivity and Trade Improvement
Project
4. Finance for Growth Development Policy Credit
5. Forests for Prosperity
The
development
partnership between Nepal
and ADB began in 1966
when Nepal joined ADB as a
founding member. ADB
provides assistance to Nepal
according to the provisions
of its Charter, regulations
and operational policies for
ordinary operation, special
operation and co-financing.
1.
2.
3.
4.
5.
In addition, ADB has also
approved assistance to
Nepalese private sector
undertakings under its nonsovereign operations. Nonsovereign
operations
comprise the provision of
any loan, guarantee, equity
investment,
or
other
financing arrangement to
privately held, state-owned,
Education
Energy
Urban development
Drinking water
Road Transportation
Major projects:
1. Power Transmission and Distribution Efficiency
Enhancement Project;
2. South Asia Sub Regional Economic Cooperation
Power System Expansion Project (SASEC
3. Disaster Risk Resilience for Public School
Infrastructure and Communities Project;
4. Second Kathmandu Valley Water Supply
Improvement Project.
5. Mugling - Pokhara Highway Improvement Project
or sub-sovereign entities.
Assistance is mostly in the
form of loans, grants and
technical assistance.
Multil
ateral
(grant
s)
Europea
n
Union(E
U)
The European Commission,
which has been present in
Nepal since 1992 for
technical cooperation, was
upgraded in 2002 to a
delegation with a diplomatic
status similar to that of
other diplomatic missions in
Nepal.
The EU’s assistance to Nepal
is given in the form of
project
grants,
service
contracts
and
budget
support. The largest area of
support of the EU has been
its budget support to the
Education
sector.EU
continues to support the
school
sector
through
budget support to the
School Sector Development
Plan (SSDP). The total
amount allocated for 20142020 is 61.4 million Euros.
1.
2.
3.
4.
5.
Education
Agriculture
Energy
General Administration
Local Development
Major Projects:
EU-Nepal Practical Partnership for Technical Vocational
Education and Training Reform (EU-TVET)
Nepal - EU Action for Recovery and Reconstruction NEARR- (State Building Contract) - CTR 383496
Nutrition Budget Support
The School Sector Development Program(SSDP)
Support for stability and peace building
Multilateral
(
loans/
grants
)
Asian
Infrastru
cture
Investme
nt Bank (
AIIB)
The Asian Infrastructure
Investment Bank (AIIB) is an
international
financial
institution established in
January 2016 to provide
financing for infrastructure
projects in Asia. It is a
multilateral development
bank with a mission to
improve
social
and
economic outcomes in Asia
and
beyond.
AIIB
headquarter is located in
Beijing,
China.
AIIB
commenced operations in
January 2016 and its
membership has grown to
105 from around the world.
Nepal is a founder member
of AIIB and has signed
Articles of Agreement in
June 2015.
AIIB is a
multilateral development
bank with a mission to
improve
social
and
economic outcomes in Asia
and beyond. The Upper
Trishuli-1
Hydropower
Project is the first project of
Nepal financed from AIIB.
Nepal is a regional founder member of AIIB and has
signed the Articles of Agreement on 29 June 2015. Nepal
has received project preparatory grant as well as project
financing from AIIB.
I. Project Preparatory Grant
The Asian Infrastructure Investment Bank (AIIB) has
approved Project preparatory grants for the following
three projects in Nepal;
 Nepal: Urban Infrastructure Investment Project:
Project Preparatory Grant of US $ 1 million
 Nepal: Power Distribution System Upgrade and
Expansion Project: Project Preparatory Grant of
US $ 1 million
 Nepal: Tamakoshi V Hydroelectricity Project (TVHEP): Project Preparatory Grant of US$ 900
thousand.
II. Project Financing
The AIIB has approved a sovereign loan on December
12, 2019 for the following project with an objective to
increase and improve the quality and efficiency of the
electricity supply areas of Western Nepal which aligns
with the sector strategy of AIIB, "The Sustainable Energy
for Asia Strategy".
 Nepal: Power Distribution System Upgrade and
Expansion project: Sovereign loan of US $112.3
million. This loan is approved by the
Government of Nepal blending with
Multilateral
(
loans/
grants
)
Internati
onal
Fund for
Agricultu
re
Develop
ment (
IFAD)
The International Fund for
Agricultural Development
(IFAD), a specialized agency
of the United Nations, was
established
as
an
international
financial
institution in 1977 as one of
the major outcomes of the
1974
World
Food
Conference. The conference
was organized in response to
the food crises of the early
1970’s
that
primarily
affected
the
Sahelian
countries of Africa.
The governance structure of
IFAD is led by the Governing
Council, its highest decisionmaking authority. Each
Member
State
is
represented
in
the
Governing
Council
by
Governors,
Alternate
Governors and any other
designated advisers. The
Executive
Board
is
responsible for overseeing
the general operations of
IFAD and for approving its
program of work.
Nepal became a member of
The International Fund for
Agricultural Development in
1977. IFAD works in the
most remote regions of
developing countries where
poverty and hunger are
deepest. Nepal country
strategic plan (2019–2023)
of IFAD reflects the zero
hunger strategic review to
The five major sectors of IFAD support during the
last five-year period:
1.
2.
3.
4.
5.
Agriculture
Forests
Livelihood
Labor
Economic Reform
IFAD’s first project in Nepal was the Integrated Rural
Development Project (Sagarmatha Zone), which was
launched in November 1979 with a loan amount of US$
11.5 million. Subsequently, on 5 December 1980, IFAD
started another credit and financial services related
project, the Small Farmer Development Project, with
total costs of US$ 16.1 million. The Second Small Farmer
Development Project (US$ 24.5 million) was initiated in
1985 after the irrigation project Command Area
Development Project (US$ 30.2 million) launched in
1981. The already completed Leasehold Forestry and
Livestock Programme (US$ 15.8 million) was started in
2004.
achieve zero hunger by
2030.
Multilateral
(
loans/
grants
)
OPEC
Fund for
Internati
onal
Develop
ment (
OFID)
The
OPEC
Fund
for
International
Development (OFID),
an
intergovernmental
development
finance
institution was established
in January 1976 by the 13
Member Countries of the
Organization
of
the
Petroleum
Exporting
Countries (OPEC) following
the decision made at the
Conference of Sovereigns
and Heads of State of the
OPEC Member Countries,
held in Algiers, Algeria in
March 1975. Initially, it was
called the OPEC Special
Fund.
The followings are the major support sectors of OFID:
1.
2.
3.
4.
5.
Drinking Water
Tourism
Urban Development
Irrigation
Agriculture
The OPEC Fund for International Development (the
OPEC Fund) has signed a US$15 million loan in favor of
NMB Bank Limited in Nepal for the purpose of financing
micro-,
small- and
medium-sized
enterprises (MSMEs) and renewable energy projects in
2019. The loan represents the OPEC Fund’s first
financial institution transaction in the country.
It provides grants in support
of technical assistance, food
aid,
research,
and
humanitarian
emergency
relief. OFID also serves as an
agent of OPEC Member
Countries
in
the
international financial arena
whenever collective action is
deemed appropriate.
Development cooperation
between Nepal and OFID
started from 1976.
Multilateral
(
grants
/loans)
SAARC
Develop
ment
Fund
(
SDF)
A Charter of the SAARC
Development Fund (SDF)
was signed by the SAARC
leaders on 3 August 2008 at
the Fifteenth SAARC Summit
(Colombo,
2–3
August
The following 4 sectors are the major support sectors of
SDF:
1. Women, Children and Social Welfare
2. Agriculture
2008).
The
[1]
SAARC Development Fund
(SDF)
Secretariat
was
formed by the Heads of
State/Governments
of
SAARC Member States in
April 2010 during the 16th
SAARC Summit in Thimphu,
Bhutan.
3. Communications
4. Health
The current projects under implementation through SDF
support in Nepal include Networking and Capacity
Building of Women Entrepreneurs (SMEs) from SAARC
Countries; Bamboo Based Enterprise Development; and
SAARC Regional Inter-Professional Master’s Program in
Rehabilitation Science.
Nepal has been a member of
SDF since its establishment
and has a representative on
the
SDF Board. The
development cooperation
between Nepal and SDF is
based broadly on SAARC’s
overall strategy with its
member nations because
SDF is a fund under the
SAARC mechanism. SDF
mainly focuses on the
welfare of the people of
Nepal as a country in the
SAARC region so that their
quality of life can be
improved.
SADF objectives were to
support
industrial
development,
poverty
alleviation, protection of
environment,
institutional/human
resource development and
promotion of social and
infrastructure development
projects in the SAARC
region.
Multilateral
Global
The Global Fund to Fight The Following major 3 sectors are the areas of GFATM
Fund to AIDS, Tuberculosis and
(
grants
)
Fight
AIDS,
Tubercul
osis and
Malaria (
GFATM)
Malaria (also referred to as 1. HIV Aids
the Global Fund, or GFATM) 2. Tuberculosis
is an international financing 3. Malaria
institution founded in 2002.
It is a public–private
The Global Fund disburses primarily through the
partnership
organization
following principal recipients: (1) Family Planning
based
in
Geneva,
Association of Nepal (FPAN); (2) National Centre for
Switzerland. The Bill &
AIDS and STD Control (NCASC); (3) National TB
Melinda Gates Foundation is
Centre (NTC); (4) Epidemiology & Disease Control
one of the first private
Division; (5) Save the Children, an international nonfoundations among many
government organization; and (6) United Nations
donors to provide seed
Development Programme, along with the
money for the project. The
Government of Nepal.
idea of establishing the
Global Fund was discussed
at a G8 summit in Okinawa,
Japan, in 2000. In January
2002, Global Fund came into
effect with the aim of
accelerating the end of AIDS,
tuberculosis and malaria as
epidemics.
Nepal has been a Delegate
Member of the Global Fund
since its establishment in
2002. In 2006 it was decided
that the South East Asian
Constituency (comprised of
11 countries of the region)
would serve as a single
voting member constituency
of the Global Fund Executive
Board. Since 2009, Nepal has
been serving as a Board
Member of the Global Fund,
with the Minister for Health
and Population of Nepal
acting as a member with
equal
rights,
and
representing the South East
Asian
Constituency
Delegation.
Multilateral
(
grants
)
The
Global
Alliance
for
Vaccines
and
Immuniz
ations (
GAVI)
BiJICAlateral Japan
(
grants
/loans)
Gavi, The Global Alliance for
Vaccines and Immunizations
previously
the
GAVI
Alliance— is a public–private
partnership
which
is
committed to increasing
access to immunization in
poor countries. The Geneva,
Switzerland
based
organization was created in
January 2000 with the help
of a US$ 750 million fiveyear pledge from the Bill &
Melinda Gates Foundation
aiming to bring together the
public and private sectors
with the shared goal of
creating equal access to new
and underused vaccines for
children living in the third
world.
Gavi has been assisting
Nepal since 2000 as a part of
its global campaign of
improving
access
for
immunization in the world’s
poorest countries. Its goal is
creating equal access to
new
and
underused
vaccines for children living
in the world’s poorest
countries
since
its
establishment in 2000.
Over the last five-year period beginning from FY
2016/17 to 2020/21, GAVI has disbursed a sum of US$
22.4 million of ODA was to Nepal. The highest volume of
annual disbursement from GAVI was US $ 11.7 million in
fiscal year 2019/20. Likewise, the lowest volume of ODA
disbursement was US $ 0.02 million in fiscal year
2018/19. The average annual disbursement over the
period stands at US $ 4.4 million.
Nepal and Japan established
diplomatic relations in 1956.
In 1968, the Embassy of
Japan was established and in
1978,
the
Japan
International Cooperation
Agency (JICA) office was
opened in Nepal. Since 1969,
Japan has been supporting
Nepal for social and
The followings are the major five sectors where Japan
used to support over the last five year period.
During the last five-year period GAVI has agreed to
provide the support of US $ 22.4 million through
separate agreements. The trend of agreement and
disbursement shows a direct relationship between the
agreement amount and the disbursement.
Gavi, in collaboration with UNICEF and WHO, is
supporting to national communication and social
mobilization strategy for routine immunization program
and providing TA to use geospatial data and for new
vaccine introduction as well strengthening new vaccine
introduction and routine immunization at national and
sub-national levels.
Currently, at Patan hospital, Gavi is funding impact
studies on two vaccines that protect children against the
main causes of deadly pneumonia: Haemophilus
influenzae type b (Hib) and pneumococcal disease.
1.
2.
3.
4.
5.
Education
Road Transportation
Earthquake Reconstruction
Urban Development
Agriculture
economic
activities.
development -Kulekhani Hydroelectric Power Plant, the Kaligandaki
Hydroelectric Power Plant, the Udayapur Cement Plant
and several bridges in Kathmandu.
Japan is the only bilateral -Tribhuvan University Teaching Hospital, the Waterdevelopment
partner Induced Disaster Prevention Technical Center and the
providing
food
grains Kanti Children’s Hospital.
(especially
rice)
and
chemical fertilizers. Japan
has been providing food
grains since 1970 under the
scheme popularly known as
KR or KRI (Kennedy Round)
and fertilizer assistance
since 1977 under KRII. Japan
has been a development
partner of Nepal since 1969.
Beginning in 1975, Japan
provided
support
to
construct several economic
infrastructural facilities.
According to the OECD, in
2020 Japan was one of the
top 5 countries in the DAC in
terms of provision of
ODA (in absolute terms). It
was ranked fourth and the
volume was US$ 16.2 billion,
0.31 percent of Japanese
GNI (OECD 2021).
Bilateral
(
grants
/loans)
South
South
Cooperat
ion (SSC)
-China
Nepal-China
economic
cooperation was initiated
with the formalization of
bilateral relations in the
1950’s. The first “Agreement
between China and Nepal on
Economic Aid” was signed in
October 1956. Since then,
China has been providing
financial and technical
assistance to Nepal, which
has greatly contributed to
Nepal’s
economic
development. From the mid-
The five major sectors of China’s support to Nepal
during the last five-year period are:
1.
2.
3.
4.
5.
Energy development
Economic and Technical cooperation
Air transportation
Reconstruction
Emergency COVID-19 Support
-China has supported the construction of major roads in
Nepal, including Araniko Highway, Kathmandu Ring
Road, Syaphrubesi-Rasuwagadi Highway. China has
supported the Sunkoshi Hydroelectricity Plant, the
60s,
the
Chinese
Government
has been
pledging grant assistance to
the Government of Nepal
under the Economic and
Technical
Cooperation
Program.
Chinese aid, according to
the first White Paper
(2011), is a model with its
own characteristics and falls
under the category of
South-South Cooperation.
The
first
“Agreement
between China and Nepal
on Economic Aid” was
signed in October 1956.
From the mid-60s, the
Chinese Government has
been
pledging
grant
assistance
to
the
Government of Nepal under
the Economic and Technical
Cooperation Program.
BiOECD/DF The UK was the first country
lateral ID-UK
in the world with which
(
Nepal
established
grants
diplomatic relations and was
/loans)
also the first country to
establish an Embassy in
Kathmandu. Nepal had
established its legation in
London in 1934, which was
elevated to the Ambassador
level in 1947.
To support the development
endeavor of Nepal, in April
1999 DFID established an incountry office staffed by a
multi-disciplinary team of
Sunkoshi-Kathmandu Electricity Transmission line and
Upper Trishuli 3A Hydroelectric Project.
-China has been supporting the post-earthquake
reconstruction projects in Nepal. Out of 25
Reconstruction projects, 12 projects were completed
and the rest are in ongoing process.
-The Chinese cooperation in the health sector includes
the establishment of B.P. Koirala Memorial Cancer
Hospital in Bharatpur, the Civil Service Hospital in
Kathmandu and the National Ayurveda Research and
Training Centre.
-The major on-going projects of Chinese support are:
Pokhara Regional International Airport, the Public
School Recovery Projects in Rasuwa and in Dolokha,
Nine-storied Basantapur Tower Restoration Project at
Durbar Square of Kathmandu, etc.
Over the last five-year period the UK Government has
supported Nepal mainly in the following 5 sectors.
1.
2.
3.
4.
5.
Education
Earthquake Reconstruction
Economic Reform
Health
Home Affairs
The UK supported the Strengthening Disaster Resilience
and Responding to Humanitarian Emergencies in Nepal
(US$ 60.2 million) and Climate Smart Development
Program (US$ 59.6 million). UK-support strategies
include Accelerating Investment and Infrastructure in
Nepal (AIIN) (US$ 9.7 million), UK/Nepal-Support to
Nepal Health Sector Program III (NHSP) (US$ 8.6
million), Nepal Market Development Program (US$ 6.4
both UK nationals and staff million) and Access to Finance for the Poor Program
appointed in country
(US$ 6.1 million).
The UK Government is
legally required to spend
0.7% of Gross National
Income (GNI) on
ODA. In
2020, the UK is the third
largest donor in ODA behind
the USA and Germany
according
to
the
Organization for Economic
Co-operation
and
Development (OECD).
BiUSAID/M Bilateral diplomatic relations
lateral CC-USA
between Nepal and the U.S.
(
was officially started in 1947
grants
during
the
democratic
/loans)
movement of Nepal, which
had culminated a new era
for opening the country for
outward oriented foreign
policy.
The U.S. is the second
country, after the United
Kingdom, with which Nepal
entered
into
official
diplomatic relations in April
25, 1947. Following the
establishment of bilateral
relations, the relations
between the two countries
were upgraded to the
Ambassadorial level in 1953.
The history of official
development cooperation
had been initiated in early
1950s as the United States is
the first country to provide
the bilateral development
The followings are the top five sectors of bilateral
cooperation between Nepal and the USA during the last
five-year period.
1.
2.
3.
4.
5.
Health
Agriculture
Education
Local Development
Energy
United States is consistently extending various
development and technical cooperation to Nepal
including Peace Corps volunteers initiated in 1961 and
much more emergency assistance.
Various sectors such as transport, communication,
public health, family planning, malaria eradication,
agriculture, forestry, energy, etc., have been benefitted
greatly. USAID/Nepal is the primary development
assistance arm of the US government to Nepal.
The MCC has chosen Nepal to mobilize US assistance
though compact program. For this to happen, Nepal and
MCC has entered into a bilateral compact (agreement)
in September 2017.
cooperation in 1951 under
its point four program.
United States is consistently
extending
various
development and technical
cooperation
to
Nepal
including
Peace
Corps
volunteers initiated in 1961
and much more emergency
assistance.
The United States is the
largest ODA donor in terms
of dollar contribution in the
world. The
Point
IV
agreement of 1951 with the
USA introduced Nepal in the
era
of
international
development
cooperation. Strengthening
democratization
process
and
human
resources
development are the key
areas of US aid mobilization
in Nepal.
BiIndia
lateral
(
grants
/loans)
The Government of India has
been
supporting
construction
of
Postal
Highway, Optical Fibre
Network, railway links,
Integrated Check Posts and
transmission
lines
at
different locations near the
border of the two countries.
Recognizing the historical
and
cultural
relations
between the two countries,
India is supporting in the
improvement
of
infrastructure and facilities
at major pilgrimage and
heritage sites such as
The followings are the top five sectors of the Indian
support to Nepal during the last five year.
1.
2.
3.
4.
5.
Health
Drinking Water
Local Development
Road Transportation
Education
The first highway to link the Kathmandu valley with the
Terai region was constructed with Indian assistance in
1953. Also, Nepal’s first six airports — at Gaucher
(1951), Simara (1964), Janakpur (1964), Bhairahawa
(1964), Pokhara (1964) and Biratnagar (1968) — were
major landmarks in the initial years.
Pashupatinath,
and Janakpur.
Muktinath Other large projects, such as Koshi Barrage (1963),
Devighat Hydropower and Irrigation Project (1983), and
Bir Hospital in Kathmandu (1984) were also the key part
Government of India has of
Indian
assistance
to
its
neighbor.
been providing ambulances
since 1994 to various
districts of Nepal. In
addition, it provides school
buses to various health and
educational institutions to
facilitate the movement of
teachers, students, doctors
and nurses.
Since the 1950’s, India has
been assisting Nepal in its
quest for prosperity and
economic
development.
India’s initial assistance was
channeled through the India
Aid Mission, which was
established in 1954 to
support
development
projects across Nepal.
BiNORADlateral Norway
(
grants
/loans)
The formal development
cooperation between the
Government of Norway and
the Government of Nepal
began in 1996 by signing a
MOU.
Norway’s
contribution is based on a
shared dedication to achieve
the
Sustainable
Development Goals.
The followings are the 5 major support sectors of the
Norwegian cooperation during the last five – year
period.
In 2017, Norway granted
approximately 193 million
NOK as the development aid
to Nepal. Its priority areas
are energy, education, good
governance, human rights,
environment and gender
equality as cross-cutting
issues.
- Norway is a long-time supporter for energy
development in Nepal. The main energy support has to
date been channeled through ADB, by a grant of NOK
330 million for the Electricity Transmission Expansion
and Supply Improvement Project and the South Asia
Sub-regional Economic Cooperation (SASEC) Power
Expansion Project-Transmission Line in Nepal.
1.
2.
3.
4.
5.
Education
Energy
Environment, Science and Technology
Women, Children and Social Welfare
Policy and strategic
-Khimti I Hydropower Plant is Norway’s largest private
Out of the total official initiative in Nepal. The plant is built with private sector
development assistance to funding as a “BOOT” agreement (Build, Own, Operate,
Nepal, approximately 75% is and Transfer) with GoN.
administered
by
the
Norwegian Embassy in
Kathmandu. The remaining
25% ODA is channeled
directly from the Norwegian
Ministry of Foreign Affairs
and the Norwegian Agency
for
Development
Cooperation (Norad).
Worth mentioning was also
support to the Energize
Nepal Project with a special
link between Kathmandu
University and Norwegian
University of Science and
Technology (NTNU), with a
grant of NOK 25 million (over
5 years).
Norway is
supporting the regional
intergovernmental learning
and knowledge centerInternational Centre for
Integrated
Mountain
Development
(ICIMOD),
with a budget of NOK 150
million over the 5 years.
Norway has worked closely
with other donors to reach
the targets for the education
program School Sector
Reform Program (SSRP)
since
2009,
and
is
particularly committed to
increasing
access
to
education for girls and
children with disabilities.
BiSDFlatral
Saudi
(
Arabia
grants
/loans)
Economic
cooperation
between the two countries
began in 1978 when Nepal
opened its Embassy in
Jeddah, Saudi Arabia. The
economic
cooperation
extended by the Saudi
Arabian Government in
Nepal initially focused on
uplifting
the
Muslim
community,
agricultural
development
and
emergency assistance.
Saudi Arabia provided emergency food assistance
during FY 1982/83. For the rehabilitation of the
earthquake victims, the SFD provided 1,380 units of
tents and over 3,000 packages of foods, as well as a cash
grant of US$ 1 million for the procurement of
equipment.
Over the last five-year period beginning from FY
2016/17 to FY 2020/21, SFD has disbursed a total of US
$ 23 million. In terms of the volume of the disbursement
the highest disbursement was of US $ 16.7 million in
fiscal year 2020/21 whereas the lowest disbursement
was limited to US $ 0.16 million in fiscal year 2017/18
which is less than the average annual disbursement of
The assistance to Nepal from US $ 4.6 million during the five-year period.
Saudi Arabia is currently
being provided through the
Saudi Fund for Development
(SFD). The SFD is an official
agency for development
cooperation established by
Royal Decree in 1974.
SFD commenced operations
in 1975 with the objective of
participating in the financing
of development projects in
developing
countries
through the granting of
loans and encouraging
national
non-crude-oil
exports. SFD operates from a
capital base provided by the
Government of Saudi Arabia.
Saudi
Arabia
provided
emergency food assistance
during FY 1982/83. For the
rehabilitation
of
the
earthquake victims, the SFD
provided 1,380 units of tents
and over 3,000 packages of
foods, as well as a cash grant
of US$ 1 million for the
procurement of equipment.
Bilateral
(
grants
/loans)
KOICA/E
DCFRepublic
of Korea
The Republic of Korea and
Nepal
established
diplomatic relations on 15
May 1974. Agreements on
Korean Youth Volunteers in
January 1992 and the
Economic
Development
Cooperation Fund (EDCF in
September 1997 were the
vital to enhance bilateral
economic cooperation.
From 1978 to 1995, KOICA
focused on developing
sericulture in Nepal by
implementing
the
Sericulture
Development
Project and constructing a
Khopasi Sericulture Center.
The Government of Korea
conducted a feasibility study
for
the
Modi
Khola
Hydroelectric Project (19931994), eventually provided a
soft loan to the project in
1997.
The following are the top five major sectors that
received Korean support during the last five-year
period.
1.
2.
3.
4.
5.
Education
Health
Planning and statistics
Agriculture
Earthquake Reconstruction
-KOICA is implementing Integrated Rural Development
of Nepal through Strengthening Research and
Development Capacity of Kathmandu University (20172023)
- Capacity Building for TVET Model Institute in Province
2 Leading to Cultivate Skilled Workforce in Construction
Sector (2021-2026), Establishment of Cyber Bureau with
Capacity Building for Nepal Police Establishment of
Cyber Bureau with Capacity Building for Nepal Police
(2021- 2026)
In 1999, with the financial
and technical support from
KOICA, the Korea-Nepal
Friendship Hospital was
established in Bhaktapur to
provide access to quality
health services to the people
of Bhaktapur and adjoining
districts.
Bilateral
GIZGermany
Nepal is an important The followings are the top five areas of German support
partner country of German
to Nepal in the last five year period.
Development Cooperation.
Over 50 years, Germany has
(
grants
/loans)
contributed
to
the
improvement of the lives of
the Nepali people with
support to the country’s
political,
economic,
environmental and social
development.
1.
2.
3.
4.
5.
Health
Energy
Alternative energy
Urban Development
Local Development
-Health and the energy sectors are the top priority
sector of cooperation of the German Government.
Since the commencement of Financial and Technical support to the Health Sector
bilateral
development SWAp is on-going. Since 2007, Physikalisch Technische
cooperation in 1961, a total Bundesanstalt (PTB) has been active in Nepal.
of Euros 1.1 billion (US$ 1.3
billion) has been committed In addition, the German Embassy runs a small-scale
for bilateral projects. On project fund to various institutions and groups in Nepal.
behalf of BMZ, FC through The Senior Expert Services (SES) supports projects with
KfW started in 1963, and TC highly qualified retired experts who come to Nepal on
through GIZ has been active short-term missions for voluntary activities.
since 1975, before the
opening of its office in
Kathmandu in 1979.
The Energizing Development
(TC) Project works to
promote sustainable access
to grid electrification under
community
management
and ownership in rural areas
as well as access to credit
financing for off-grid micro
hydropower development.
The priority areas of NepalGerman cooperation are
sustainable
economic
development and trade,
renewable energy and
energy
efficiency,
and
health. BMZ pursues a
biennial commitment cycle
in Nepal and allocates the
amount
of
assistance
accordingly.
BiSwizerla
lateral nd
(
grants
/loans)
The
first
cooperation
initiative was in the field of
cheese
and
diary
development from 19561964. The construction of
the Lamosanghu-Jiri Road,
during 1974-1985 facilitated
the transfer of knowledge of
mountain road construction
acquired
over
long
experience in the Swiss Alps.
Since 1963 Nepal has been a
priority country for Swiss
development cooperation.
Switzerland works closely
with local authorities, other
donors, and international
organizations in Nepal. Its
key
partners
include
Helvetas
Swiss
Intercooperation, AF-ITECO AG,
Swiss Contact.
Switzerland also works with
multilateral organizations
such as the World Bank, the
Asian Development Bank
and the International Centre
for Integrated Mountain
Development (ICIMOD). In
the
aftermath
of
catastrophic earthquake of
2015,
the
Swiss
Humanitarian
Aid
in
coordination
with
development cooperation
actively supported the
Government of Nepal.
The followings are the top five sectors of Swill
development cooperation in Nepal during the last fiveyear period.
1.
2.
3.
4.
5.
Agriculture
Local Development
Education
Labor
Road Construction
The areas of Swill involvement to achieve the overall
goals are: i) all people at subnational level build an
inclusive and accountable federal state, ii) the women
and men, especially from disadvantaged groups, find
employment and increase their income and iii) the
migrants and their families are better protected by
democratic institutions in Nepal and benefit from decent
work conditions abroad.
Bilateral
(
grants
/loans)
KFAED (
Kuwait
Fund for
Arab
Economi
c
Develop
ment)Kuwait
Nepal
and
Kuwait
established
diplomatic
relations on 25 February
1972. Nepal established its
Embassy in Kuwait on 21
March 2010. The Embassy of
Nepal in Kuwait facilitates
aid and other matters with
KFAED. There is no Embassy
of the State of Kuwait in
Nepal.
The followings are the major sector of Kuwait’s support
in Nepal during the last five year period.
1. Agriculture
2. Irrigation
3. Energy
Kuwait has been supporting Nepal by providing soft loans for
Economic
cooperation projects, especially in the areas of hydropower generation
between the two countries and irrigation.
started in January 1976 with
the signing of a loan
agreement amounting US$
18.5
million
for the
Kulekhani
Hydro-Project.
Further, in 1979, Kuwait
provided a supplementary
loan of US$ 7.4 million to
meet the cost overrun of the
same project.
On 25th January 1985,
Kuwait provided KWD 6.0
million (approximately US$
20
million)
to
the
Marsyangdi Hydro Power
Project through a separate
loan agreement. Kuwait
further
provided
an
additional KWD 2.9 million
(around US$ 9.5 million) for
works related to the same
Project.
A loan agreement of KWD
1.5 million (around US$ 5
million) was concluded on
26 October 1998 for the
execution of the Praganna
Kulo Irrigation Project in
Dang district. In 2013, KFAED
agreed to provide loan
assistance of US$ 18 million
for
the
Budhiganga
Hydropower Project to be
developed
in
Achham
District.
Bilateral Australia
(
grants
/loans)
In 2020 Nepal and Australia
celebrated 60 years of
diplomatic
relationship
based on long standing
history and cordial support
although Australia had
included Nepal in its
development cooperation
program in 1979.
The top five sectors of Australian support to Nepal
during the last five-year period are:
At that historical time, Nepal
received assistance from
Australia in areas of forestry,
livestock development and
manpower training. The
MoU agreed in May 2003
between the GoN and the
Government of Australia
(GoA)
provides
strong
grounds for cooperation in
development programs in
line with Nepal’s goals of
economic development.
Policy and strategic areas have got the highest level of
support during the fiscal year 2020/21. Likewise,
education and health sectors have got important level
of support throughout the five-year period.
1.
2.
3.
4.
5.
Policy and strategic,
Health,
Drinking water,
Education,
Livelihoods, etc.
Australia also supports the
World Bank-managed multidonor trust fund designed to
strengthen the Government
of Nepal’s public financial
management institutions.
BiThe
lateral Nederlan
(
ds
grants
/loans)
The Government of the The followings are the major sectors of Dutch support
Netherlands provides ODA
to Nepal during the last five-year period.
to Nepal including other
developing
countries
1. Drinking water
through SNV Netherlands
Development Organization 2. Energy
which opened its first Asia 3. Environment, Science and Technology
office in Nepal in 1980.
Economic
cooperation
between the two countries
started earlier, in 1976, with
the involvement of Dutch
volunteers
(technicians/engineers) to
assist
in
various
development sectors.
In 1983, Nepal and the Dutch
government signed an
agreement
on
the
employment
of
Dutch
volunteers for economic
development
and
cooperation.
The
Biodiversity Sector Support
Program (BSSP) was one of
the major projects funded
by SNV Nepal.
BiFinland
lateral
(
grants
/loans)
Finnish cooperation with
Nepal commenced in 1982
with grant assistance of
6,000 MT of chemical
fertilizers. Presently Nepal is
one of Finland’s primary
long-term
development
partner countries.
The Finnish development
program in Nepal focused
mainly on energy, forestry
and water resources. Nepal
has also received assistance
from Finland for the detailed
engineering design of the
Kali Gandaki Hydropower
Project, rural electrification,
Major sectors of economy supported by the Finnish aid
during the last five years are:
1.
2.
3.
4.
5.
Education
Local Development
Women, Children and Social Welfare
Labor
General Administration
Local development is one of the highest priority sectors
of cooperation during the decade followed by the
education sector. Finland’s contribution to RWSSP-WN
II is 13.7 million euros for 2013-2019.
RVWRMP III (2016-2022) covers 10 districts in Provinces
6 and 7, aims to achieve universal access to basic WASH
services, and improved livelihoods with the
establishment
of
functional
planning
and
and the multi-fuel diesel
plant.
According to the Country
Strategy for Development
Cooperation Nepal 20162019, Finland’s focus of
support to Nepal is on access
to clean drinking water and
sanitation,
developing
education, and improving
the influence of women and
other vulnerable groups.
BiSwitzerla
lateral nd
(
grants
/loans)
More recently, Finnish
development cooperation
has shifted towards a focus
on alleviation of poverty,
environmentally sustainable
development, disaster risk
reduction,
and
the
promotion of democracy,
human rights and a
participatory system of
governance.
The
first
cooperation
initiative was in the field of
cheese
and
diary
development from 19561964. The construction of
the Lamosanghu-Jiri Road,
during 1974-1985 facilitated
the transfer of knowledge of
mountain road construction
acquired
over
long
experience in the Swiss Alps.
Since 1963 Nepal has been a
priority country for Swiss
development cooperation.
Switzerland works closely
with local authorities, other
donors, and international
organizations in Nepal. Its
key
partners
include
implementation frameworks for all water users and
livelihoods promotion in the project area.
Finland supports two programs: the School Sector
Development Programme (SSDP) and the Technical
Assistance for Soft Skills Development (TASS). Finland’s
contribution to SSDP is 20 million euros for 2016-2020
and to TASS-project 1.7 million euros for 2016-2019.
The followings are the top five sectors of Swill
development cooperation in Nepal during the last fiveyear period.
1.
2.
3.
4.
5.
Agriculture
Local Development
Education
Labor
Road Construction
The Swiss cooperation strategy Nepal (2018-2021) has
stipulated the objectives that women and men benefit
from equitable socio-economic development and
exercise their rights and responsibilities in an inclusive
federal state. The Swiss government has earmarked CHF
130 million (equivalent to Rs. 14.7 billion) of
disbursement during the four year period.
Helvetas
Swiss
Inter- The areas of Swill involvement to achieve the overall
cooperation, AF-ITECO AG, goals are: i) all people at subnational level build an
Swiss Contact.
inclusive and accountable federal state, ii) the women
and men, especially from disadvantaged groups, find
Switzerland also works with employment and increase their income and iii) the
multilateral organizations migrants and their families are better protected by
such as the World Bank, the democratic institutions in Nepal and benefit from
Asian Development Bank decent
work
conditions
abroad.
and the International Centre
for Integrated Mountain
Development (ICIMOD). In
the
aftermath
of
catastrophic earthquake of
2015,
the
Swiss
Humanitarian
Aid
in
coordination
with
development cooperation
actively supported the
Government of Nepal
BiBelgium
lateral
(
grants
/loans)
Net bilateral aid flows from
DAC
donors,
Belgium
(current US$) in Nepal was
reported at 90000 USD in
2020, according to the
World Bank collection of
development
indicators,
compiled from officially
recognized sources. Nepal Net bilateral aid flows from
DAC donors, Belgium - actual
values, historical data,
forecasts and projections
were sourced from the
World Bank on February of
2023.
Net bilateral aid flows from DAC donors are the net
disbursements of official development assistance (ODA)
or official aid from the members of the Development
Assistance Committee (DAC). Net disbursements are
gross disbursements of grants and loans minus
repayments of principal on earlier loans. ODA consists
of loans made on concessional terms (with a grant
element of at least 25 percent, calculated at a rate of
discount of 10 percent) and grants made to promote
economic development and welfare in countries and
territories in the DAC list of ODA recipients.
Implications of Nepal's Foreign Debt
Nepal's increasing foreign debt has several implications for the country's economy and its people.
One of the most significant implications is the high debt servicing cost, which refers to the
amount of money that Nepal must pay in interest and principal payments on its foreign debt. The
high debt servicing cost reduces the amount of money that the government can spend on social
and development programs, which can have a negative impact on the country's development.
Another implication of Nepal's foreign debt is the increased vulnerability to external shocks. In
times of economic crisis, such as a global recession, Nepal may find it difficult to meet its debt
obligations and maintain financial stability. This can lead to a decline in foreign investment and a
further deterioration of the country's economy.
Foreign debt can have both positive and negative implications for a country like Nepal in the short
and longer term as:
Short-term Implications:
-
-
Increased borrowing from foreign sources can provide immediate access to funds
to finance critical infrastructure projects or to manage balance of payments
deficits.
However, short-term foreign debt can also lead to an increase in the country's
debt service payments, which can put a strain on the government's finances and
limit its ability to invest in social welfare programs and other developmental
activities.
Long-term Implications:
-
-
-
Heavy reliance on foreign debt can lead to an increase in the country's external
vulnerability, as the repayment of the principal and interest on the debt becomes
a significant burden on the economy.
High foreign debt levels can also increase the country's exposure to exchange rate
fluctuations and external economic shocks, which can make it more difficult to
manage the economy effectively.
Furthermore, if the borrowed funds are not used effectively to promote
sustainable economic growth, then the debt burden can become unsustainable in
the long run, leading to economic instability.
Overall, while foreign debt can be a useful tool for financing development in the short term, it is
important for a country like Nepal to manage its debt levels effectively to ensure that its longterm economic stability is not compromised.
Steps to Manage Nepal's Foreign Debt
To manage its foreign debt, Nepal can take various steps to reduce its debt burden and improve
its financial stability. One of the most important steps is to increase its export base and reduce
its reliance on imports. This can be achieved by promoting the growth of export-oriented
industries and diversifying its export markets. Another step that Nepal can take is to improve its
debt management practices. This includes developing a comprehensive debt management
strategy, strengthening debt monitoring and reporting systems, and improving debt
transparency and accountability. These measures can help Nepal to better manage its debt and
reduce its debt servicing costs.
In addition, Nepal can also explore alternative sources of financing, such as foreign direct
investment (FDI) and remittances. FDI can help to finance development projects and promote
economic growth, while remittances can provide a stable source of income for the country and
reduce its reliance on foreign aid and loans.
Conclusion
Nepal's foreign debt has been increasing steadily over the years, which has raised concerns about
its ability to meet its debt obligations and maintain financial stability. The country's high trade
deficit, low export base, and dependence on foreign aid and loans have been major contributors
to its increasing foreign debt. To manage its debt burden and improve its financial stability, Nepal
can take various steps, including increasing its export base, improving its debt management
practices, and exploring alternative sources of financing. These measures can help Nepal to
reduce its debt burden, enhance its economic growth, and promote its long-term development.
While managing foreign debt is a complex and challenging task, it is essential for Nepal to take
proactive steps to address its debt challenges and improve its financial stability.
Another step that Nepal can take to manage its foreign debt is to improve its fiscal management.
The country's fiscal deficit has been a major concern, as it has contributed to the increasing
foreign debt. Nepal can take measures to reduce its fiscal deficit by increasing its revenue base,
improving tax collection, and reducing its expenditure. By managing its fiscal deficit, Nepal can
reduce its reliance on external borrowing and reduce its debt burden.
Nepal can also explore the possibility of debt restructuring or debt forgiveness. Debt
restructuring involves negotiating with creditors to restructure the terms of the debt, such as
reducing the interest rate or extending the repayment period. Debt forgiveness involves
canceling a portion of the debt owed by the debtor. While debt restructuring or debt forgiveness
can provide short-term relief, it is important for Nepal to address the root causes of its debt
challenges and develop a sustainable debt management strategy.
In conclusion, Nepal's increasing foreign debt is a major concern for the country's economic
development and financial stability. Nepal can take various steps to manage its debt burden,
including increasing its export base, improving its debt management practices, exploring
alternative sources of financing, improving its fiscal management, and exploring the possibility of
debt restructuring or debt forgiveness. By taking proactive steps to manage its foreign debt,
Nepal can enhance its economic growth, promote its long-term development, and ensure
financial stability.
References
1- Ministry of Finance (2022), Economic survey, Government of Nepal. Retrieved from
mof.gov.np
2- Ministry
of
Finance
(2022),
Nepal
Development
Partners
profile.
https://mof.gov.np/site/publication-detail/3210
3- NRB Economic Review ( 2022) Year 2022 Volume 34_2, (nrb.org.np)
4- NRB Annual Report ( 2022) NRB_Annual_Report__2078-79.pdf
5- Curbing Nepal’s Rising Debt: Current Situation and Implications – Nepal Economic Forum
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