Trend and Structure of Public Debt in Nepal

Abstract

Economic development is the main goal of under developed countries but the lack of financial resources it cannot be easily achieved. To minimize the deficiency of financial resources public debt can play an important role. So, developing countries like,Nepal need internal as well as external borrowing to support the budgetary deficits. Underdeveloped country has low rate of savings investment, income and low living standard due to the low per capita income and poverty, dualistic economy, unutilized natural resources, lack of capital etc. Resource gap is a burning problem of the underdeveloped economy due to the lack of capital.Public debt is only one solution tofill the lack of capital. In the research period, it was found that government borrowing has been increased unlikely and financed mostly on the unproductive sector including uncertainties, high expenditures and hence the government always has the lack of resources and then borrows the new loan to pay previous ones. That's why, the public debt and its interest is increasing rapidly, but addressing capacity for redemption the debt is not increasing in the same pace. From the study period F.Y. 1991/92 to F.Y. 2010/11, it is concluded that the average annual growth rate of GDP and revenues are extremely low as compared with that of debt and its servicing obligation. Because of investment in unproductive borrowed funds, other things remaining the same, there are the symptoms of progressively going towards the debt trap soon.Hence fiscal deficit is increasing in any way and the public debthas played a vital role in socio-economic development of the country.