Debt Status in Nepal

9 December 2022 by Sudhir Shrestha

Presentation about the state of debt in Nepal by Sudhir Shrestha at the 9th CADTM South Asia meeting

CADTM delegate at the 9th CADTM South Asia meeting in Colombo, Sri Lanka (2nd to 4th of december 2022), Sudhir Shrestha detailed the situation of Nepal’s external public debt. In this country of nearly 30 million people, 34% of the budget is financed by loans.

Debt service Debt service The sum of the interests and the amortization of the capital borrowed. , which varies between 2% and 4% of GDP GDP
Gross Domestic Product
Gross Domestic Product is an aggregate measure of total production within a given territory equal to the sum of the gross values added. The measure is notoriously incomplete; for example it does not take into account any activity that does not enter into a commercial exchange. The GDP takes into account both the production of goods and the production of services. Economic growth is defined as the variation of the GDP from one period to another.
, will increase sharply in the coming years as many dollar repayments will have to be made. As the rupee depreciates against the US dollar, it will be more expensive to repay the same amount of US dollars as before (more Nepalese rupees will have to be paid to obtain one US dollar). In addition, Nepal faces a debt crisis, as it is heavily dependent on imports and its foreign exchange reserves are dwindling.

Read Also : Colombo Declaration

Environmentally, Nepal is also in great difficulty, although its responsibility for climate change is minimal. The population suffers from flooding due to melting glaciers, etc. Recently, the Nepalese government accepted a loan from the World Bank World Bank
The World Bank was founded as part of the new international monetary system set up at Bretton Woods in 1944. Its capital is provided by member states’ contributions and loans on the international money markets. It financed public and private projects in Third World and East European countries.

It consists of several closely associated institutions, among which :

1. The International Bank for Reconstruction and Development (IBRD, 189 members in 2017), which provides loans in productive sectors such as farming or energy ;

2. The International Development Association (IDA, 159 members in 1997), which provides less advanced countries with long-term loans (35-40 years) at very low interest (1%) ;

3. The International Finance Corporation (IFC), which provides both loan and equity finance for business ventures in developing countries.

As Third World Debt gets worse, the World Bank (along with the IMF) tends to adopt a macro-economic perspective. For instance, it enforces adjustment policies that are intended to balance heavily indebted countries’ payments. The World Bank advises those countries that have to undergo the IMF’s therapy on such matters as how to reduce budget deficits, round up savings, enduce foreign investors to settle within their borders, or free prices and exchange rates.

to finance climate change adaptation measures. Sudhit Shrestha reminded the audience that Nepal should not be trapped in the vicious circle of debt, but should demand grants from the countries responsible for the climate crisis. The government of Nepal should not negotiate with the World Bank and IMF IMF
International Monetary Fund
Along with the World Bank, the IMF was founded on the day the Bretton Woods Agreements were signed. Its first mission was to support the new system of standard exchange rates.

When the Bretton Wood fixed rates system came to an end in 1971, the main function of the IMF became that of being both policeman and fireman for global capital: it acts as policeman when it enforces its Structural Adjustment Policies and as fireman when it steps in to help out governments in risk of defaulting on debt repayments.

As for the World Bank, a weighted voting system operates: depending on the amount paid as contribution by each member state. 85% of the votes is required to modify the IMF Charter (which means that the USA with 17,68% % of the votes has a de facto veto on any change).

The institution is dominated by five countries: the United States (16,74%), Japan (6,23%), Germany (5,81%), France (4,29%) and the UK (4,29%).
The other 183 member countries are divided into groups led by one country. The most important one (6,57% of the votes) is led by Belgium. The least important group of countries (1,55% of the votes) is led by Gabon and brings together African countries.
, it should audit its public debt, cancel the illegitimate part of it and finance itself by increasing progressive taxes, by taxing the rich. Today, the country depends almost exclusively on loans or unfair indirect taxes such as value added tax.

Sudhir Shrestha

South Asia Alliance for Poverty Eradication (SAAPE)



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