Print Edition - 2014-12-08 | MONEY
Per capita debt rises to Rs 20,069
Dec 7, 2014-Debt burden on every Nepali stood at Rs 20,069 at the end of the last fiscal year, while the country’s total debt reached Rs 553.5billion, a government report has shown.
Based on the population figure of 27.58 million, the per capita debt rose by Rs 36 over the review period, according to the Annual Report on the Government’s Internal and External Debt 2013-14, published by Financial Comptroller General Office (FCGO).
Of the total debt, Rs 206.68 billion is internal, while Rs 346.81 billion is external.
Although the government has more external liabilities, it pays more for domestic debt. It paid 16 percent higher principle for domestic debt, while interest payment also remained higher.
Joint Secretary at the Finance Ministry Sishir Dhungana said the higher cost for domestic debt is natural as the interest rate at the time of raising the funds some four-five years ago was higher due to liquidity crunch in the banking system. “The cost will be lower for the funds raised since the last fiscal year as the banking system is facing excess liquidity,” he said.
Commercial banks hold around 77 percent of the total domestic debt. As the government uses domestic debt as a monetary instrument particularly to address the liquidity situation in the banking system, the interest rates vary to time to time.
Another joint secretary at the ministry Madhu Marasini said although the cost of external debt is lower, there are exchange rate risks. “External debt should be taken in the context of country’s balance of payment situation,” he said.
As the country’s economy is import-driven, it spends a huge chunk of foreign exchange earnings from remittance and other sources to finance imports. More external loans means, more vulnerability in the balance of payment.
The report has suggested maintaining balance between domestic and external debts.
According to the report, the principal repayment of debt has been increasing since fiscal year 2011-12, with the total payment in the last fiscal year reaching Rs 41.87 billion. The figure had decreased during the period between 2008-09 and 2010-11.
However, interest payment has been decreasing since fiscal 2011-12, although it was rising the previous three years.
Although the total debt increased over the years, debt against gross domestic product (GDP) has decreased. According to the report, the figure decreased to 28.7 percent in 2013-14 from 40.5 percent in 2008-09.
Citing improved debt repayment capacity, multilateral donor agencies like World Bank (WB) and Asian Development Bank (ADB) have stopped providing grants to Nepal. The country’s debt liability to International Development Association, the World Bank’s financing branch to the poorest countries, stands at 44.5 percent, while that to ADB is 42 percent.
With these two biggest donors only providing loans, the liability to multilateral donor agencies increased 4.78 percent, while bilateral debt liability decreased 2.7 percent.
Published: 08-12-2014 10:26