Kathmandu, March 31:

Senior government representatives, economists and donors today have underscored the need for effective public debt management in Nepal.

Speaking at a book launching function ‘Managing Public Debt in Nepal’, state minister for finance Dr Roop Jyoti said that public debt in Nepal has not been managed well. He hoped that issues contained in the book would be instrumental in managing public debt.

Dr Sultan Hafeez Rahman, country director for Asian Development bank in Nepal, hoped that the book which speaks about ways and means on public debt management would be useful to manage accumulated especially domestic debt of Nepal so far.

Nepal is facing difficulties in various fronts due to low rate of economic growth, said Dr Rahman. The book was prepared with financial assistance from ADB under the ‘Strengthening Institutional Capacity for Effective Public Debt Management’ project.

Between 1975 and 2004, budget deficit has remained at an average of 4.8 per cent of gross domestic product (GDP). The proportion of budget deficit financed by external debt has averaged 56.6 per cent, whereas the proportion financed by domestic debt has average 43.4 per cent, according to the book released today. As a result, in 2004, public debt in Nepal amounted to about Rs 328.2 billion or more than 66.3 per cent of GDP and external debt accounted for more than 74.4 per cent of this total public debt, states the book.

Dr Madhav Ghimire, joint secretary at the ministry of finance stressed on the need to expedite developmental, institutional and legal reforms for effective public debt management in Nepal.

Dr Bhuwan Bajracharya, economist who took a lead in studying on ‘Managing Public Debt in Nepal’ said that the objective of public debt management is to ensure that the government’s financing needs and its payment obligations are met at the lowest possible cost over the medium to long run.

Dr Bajracharya said that public debt management aims at contributing to the efficient functioning of capital markets by providing safe assets to households and institutional investors and setting benchmarks for the pricing of other securities. He mentioned on domestic debt, external debt management, contingent liabilities management, sub/on-lending management, institutional and legal frameworks.

He has proposed a number of suggestions to manage public debt with effective mechanisms. Issues such as resource mobilisation, debt and risk analysis, management information system and settlements, debt sustainability analysis, budget deficit and cost of financing were also discussed.

According to Dr Bajracharya, as per the forecast from the debt sustainability analysis, under the plausible economic growth scenarios, the debt to GDP ratio in Nepal is forecast to steadily increase from 67 per cent in 2004 to about 75 per cent in 2009. However, he said that the share of external debt is expected to decrease from 50 per cent in 2003 to 35 to 36 per cent in 2009.