The size of public debt in Nepal is increasing rapidly every month. As of last Falgun, the government's outstanding public debt has reached 2878 billion rupees. This debt is equivalent to 47.13 percent of the gross domestic product (GDP). In the fiscal year 2080/81 and in the previous fiscal year, the allocation under the heading of financial management exceeded the size of capital expenditure. Even if this situation does not occur in the current fiscal year, in the coming year, a situation may arise in which more money than development expenditure may have to be allocated to repay the principal and interest of the debt. This risks shrinking the government's ability to invest in the future. Therefore, it is necessary to have a serious discussion on why to borrow.

From an economic perspective, a deficit budget with a plan for spending more than income is considered good. Because it is believed that in a country where the government makes every effort to raise that insufficient amount, economic activity increases and employment opportunities are created. Imagine, what happens if the government makes a deficit budget every year and does not make any effort to meet it? In such a situation, the deficit accumulates every year.

To meet that deficit, the government needs to borrow again. This is exactly the situation that Nepal's public debt has reached. In the context of Nepal, the government has been breaking fiscal discipline and increasing the budget deficit, resulting in a continuous increase in fiscal imbalances. This has led to instability in the macro economy. Due to the increasing principal and interest payments on government debt, the government has been under pressure to further reduce capital expenditure in recent years. This is why it is not possible to allocate sufficient budget for productive and infrastructure sectors, nor has it been possible to allocate budget for programs to reduce poverty, increase income and employment. 

One way to solve this problem is to reduce current expenditure. But reducing current expenditure is not that easy. Because the government is forced to allocate large amounts of money for the mandatory obligations of the government, including social security, education, and health. In this structure, there is no way to reduce the current account on a large scale.

On the other hand, the government has not been sensitive at all. This indicates the possibility of a serious budget crisis in the coming year. At this time, the maturity period of the large amount of debt taken in the past is also beginning to complete. Due to this situation, it seems that there will be a big problem in the effective management and sustainability of government debt in the coming days. If this situation is not improved, the country's financial management will be under great pressure due to the increasing amount of public debt.

Public debt is a natural process for infrastructure development. Any country may not have sufficient sources of income to address its national development aspirations, so there is a natural need for international grants and public loans. Grants and loans not only relieve the burden, but also promote bilateral relations and various regional and international cooperation. This process also transfers skills and technology. There is no fixed point as to what percentage of debt a country will borrow.

Therefore, there is no need to be alarmed that the debt has reached such a percentage of GDP. Because this data is only for comparison. Even prosperous countries often borrow more than the size of GDP. Generally, countries determine the limit of debt based on their economic structure, background, and development capacity.

The main concern is whether the debt received in this way has been utilized properly and whether projects have been constructed or not? If the debt is not utilized properly in the productive sector, even if it is less in proportion to GDP, the country will not benefit. On the contrary, if loans are used to build large infrastructure, projects of national importance and pride, and investment in productive sectors is made, the country has benefited even if it is 100 percent of the GDP.

There is a growing concern that the public debt that should be the driver of development is not facing the risk of becoming a future burden. Because in recent years, the loans taken by the government have also started being spent on current expenses. On the one hand, capital expenditure has not been spent on the basis of appropriation. We have built/are building projects like airports, roads, fast tracks with external loans. The percentage obtained from recent projects is not good.

Let's look at the example of Pokhara or Bhairahawa airports, we have the experience of having difficulty in operating them. A long list of such projects can be prepared. But the conclusion is that the selection of projects built/to be built with loans should be examined to what extent they yielded returns, and whether such projects were linked to qualitative economic contributions or not.

Taking loans is not the problem, the main question is what we are spending that loan on. Therefore, at this time, we need to come together to review large projects built on debt and prepare a future strategy. Because the more we add debt now, the basis and facilities for borrowing in the future will decrease. It is necessary to be restrained before reaching that stage. Public debt should be viewed qualitatively, not quantitatively. For this, the priority for borrowing should be clear.