Nepal’s external debt increased by Rs16.86 billion in the first quarter of the fiscal year as the rupee plunged against the US dollar and Special Drawing Rights (SDR), Financial Comptroller General Office (FCGO) has said.

SDR is a supplementary reserve currency created by the International Monetary Fund. Multilateral donor agencies usually use it for extending loans.

FCGO, which keeps records of the government’s income and expenditure, said the debt has increased by 4.9 percent (Rs16.86 billion) to Rs360.12 billion. “For external loans, the exchange rate is the most sensitive factor,” said Deputy Financial Comptroller General Ramesh Siwakoti. 

The exchange rate was Rs101.74 per US dollar on July 16, 2015, but the Nepali rupee plunged to Rs104.09 per US dollar on October 17, 2015. As a result of the rise in external debt, the overall debt ratio of the country increased by 2.1 percent to Rs 556.33 billion in the quarter under review. This, however, is lower than the total government debt of Rs558.45 billion as of the first quarter of the last fiscal year.

On the other hand, domestic loans decreased by Rs2.7 percent (Rs5.44 billion) to Rs196.20 billion, according to FCGO, due to due to early repayment of some of the debts and no issuance of debt instruments in the first quarter.

The government has adopted a policy of making payments against treasury bills early in the year instead of allowing them to roll over. Treasury bill is a type of debt instrument the Nepal Rastra Bank (NRB) and banks and financial institutions subscribe. 

“As the government is being criticised for spending most of the capital budget in final quarters of the fiscal year, which also covers debt payment, the decision to make early payment was taken,” said Siwakoti.

As part of the plan, the government paid over Rs5 billion to the central bank during the first quarter  against NRB’s ownership of treasury bills. 

With the government not raising domestic debt in the first quarter, it received Rs7.37 billion in external debt, 95 percent which came from multi-lateral donor agencies, according to FCGO.

As far as debt servicing is concerned, the government spent Rs9.82 billion in the quarter. Of the total amount, Rs6.14 billion went for the repayment of domestic debt and Rs3.68 billion was paid to external creditors.