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The country is navigating a difficult economic path. Every year, the debt burden grows, and now the government is compelled to borrow just to repay installments with interest.

In the fiscal year 2024/25, the government spent Rs 362.59 billion on servicing internal and external debts—more than Nepal’s entire development budget. In contrast, only Rs 3.52 billion was allocated for capital expenditure, and even that remains largely unspent on development works. This imbalance raises a serious question: where will the resources for development come from?

Nepal is graduating from a Least Developed Country (LDC) to a developing nation, but with this upgrade comes the loss of many LDC-specific financial facilities. International institutions, including the World Bank, have doubled loan interest rates for Nepal from 0.75% to 1.5%. Naturally, this will increased the cost of various projects.

Delays in project completion further inflate costs, and widespread corruption only worsens the situation. Public debt now stands at Rs 26.69 billion. Alarmingly, the country is not only borrowing to repay old loans but also to sustain the federal structure—an expensive model of governance that adds to the debt burden every year.

Nepal urgently needs to channel more resources into development by reducing general sector expenditure. Yet, political parties seem reluctant to make such reforms. If the current trend continues, the economy is headed down a dangerous path. Without decisive action to safeguard our economic health, we risk facing a crisis that could very well be called a failed economy.