KATHMANDU, Jan 25: The Nepali currency plunged to a record low against the US dollar on Saturday, increasing the government’s debt liabilities at a time when Nepal is grappling with a rapidly rising public debt burden.
Nepal Rastra Bank (NRB) fixed the exchange rate at Rs 147.41 per US dollar for the day. Over the past six months, the rupee has depreciated by around Rs 10 against the dollar.
As Nepal’s currency is pegged to the Indian rupee, the weakening of the Indian currency against the US dollar has directly affected the Nepali rupee. Indian media reported that the Indian rupee hit an all-time low of INR 92 per US dollar on Friday.
Nepali rupee hits new low against US dollar
Analysts attribute the weakening of the Indian rupee to a sluggish domestic market, persistent foreign fund outflows, rising crude oil prices and a surge in US Treasury yields, all of which have strengthened the US dollar globally.
NRB officials said the appreciation of the US dollar significantly increases Nepal’s debt liabilities, particularly external debt. Records from the Public Debt Management Office (PDMO) show that Nepal’s public debt reached Rs 28.06 trillion as of mid-January, up from Rs 26.74 trillion at the end of fiscal year 2024/25.
Of the total debt, outstanding domestic borrowing stood at Rs 13.19 trillion, while external debt climbed to Rs 14.87 trillion, accounting for 53 percent of the total. This marks the first time in recent years that external debt has exceeded domestic debt.
According to the PDMO, the government borrowed Rs 214.55 billion in the first six months of the current fiscal year and spent Rs 152.89 billion on debt servicing during the same period. Currency depreciation alone increased the country’s public debt liability by Rs 70.68 billion during the review period.
Although Nepal’s overall debt level remains broadly manageable, the rising cost of debt servicing and the growing share of external debt have increased fiscal vulnerabilities, says economist Keshab Acharya.
A weaker domestic currency could benefit remittances, tourism and exports, as earnings in these sectors are largely denominated in US dollars. Tourism receipts and exports, including handicrafts, are expected to improve. However, the depreciating rupee is also likely to raise project costs, as most capital goods are imported.
