[{"data":1,"prerenderedAt":-1},["ShallowReactive",2],{"doc-detail-110736-en":3,"doc-seo-110736-105":29,"detail-sidebar-cat-0-en-105":91},{"code":4,"msg":5,"data":6},0,"success",{"doc_id":7,"user_id":8,"nickname":9,"user_avatar":10,"doc_module":4,"category_id":11,"category_name":12,"doc_title":13,"doc_description":14,"doc_content":15,"file_id":16,"file_url":17,"file_type":18,"file_size":19,"view_count":20,"is_deleted":4,"is_public":20,"is_downloadable":20,"audit_status":20,"page_count":21,"language":22,"language_code":23,"site_id":24,"html_lang":23,"table_of_contents":25,"faqs":26,"seo_title":13,"seo_description":14,"update_tm":27,"read_time":28},110736,1099514067438,"River Wang","https://ap-avatar.wpscdn.com/avatar/100002539ee87300030?x-image-process=image/resize,m_fixed,w_180,h_180&k=1780474512215547542",8,"Research & Report","Nepal - Joint World Bank-IMF Debt Sustainability Analysis - Low Risk of Debt Distress","Nepal’s joint World Bank–IMF debt sustainability analysis assesses both external and overall debt risk as low, despite indicator breaches for two external debt metrics under three shock scenarios. Staff applies judgment, supported by low PV ratios of PPG external debt to GDP and debt service to revenue, alongside unusually high remittances. Public debt and external debt are projected to peak in FY2024/25 as fiscal deficits decline and reliance on domestic borrowing increases. The analysis emphasizes reforms to strengthen resilience, diversify sources, improve productivity and competitiveness, and monitor contingent liabilities.","Public Disclosure Authorized  \nPub lic Disc losure Authorized  \nApproved by:  \nMarcello Estevão and Zoubida Allaoua (IDA) and Anne-Marie Gulde-Wolf and Maria Gonzalez (IMF)  \nPrepared by the staff of the International Development Association (IDA) and the International Monetary Fund (IMF) .  \n\n|  |  |\n| --- | --- |\n| Risk of external debt distress | Low |\n| Overall risk of debt distress | Low |\n| Granularity in the risk rating | Not Applicable |\n| Application of judgment | Yes |\n\nBoth external and overall debt in Nepal are assessed at low risk of debt distress.1 Two external debt indicators, PV of PPG external debt-to-exports ratio and debt service-to-exports ratio, breach the indicative thresholds under three shock scenarios, suggesting a mechanical rating of moderate risk of debt distress. However, staff has applied judgement to assess Nepal’s external debt to be at low risk of debt distress due to low ratios of PV of PPG external debt-toGDP and PPG external debt service-to-revenue and unusually high remittance levels; the PV of public debt-to-GDP does not breach the benchmark under any stress test. Remittances, rather than exports, are the major source of foreign exchange to balance the current account and service external debt. Both external debt and public debt are projected to peak in FY2024/25, reflecting declining fiscal deficits and increasing reliance on domestic borrowing as Nepal’s financing markets gradually deepen. These findings stress the importance of implementing reforms to increase the economy’s resilience to external shocks through, for example, encouraging diversification, improving productivity and competitiveness, and enhancing monitoring of risks related to contingent liabilities.  \n|  |  |  |  |  |  |\n| --- | --- | --- | --- | --- | --- |\n| Subsectors of the public sector\u003Cbr>Central government\u003Cbr>State and local government\u003Cbr>Other elements in the general government\u003Cbr>o/w: Social security fund\u003Cbr>o/w: Extra budgetary funds (EBFs)\u003Cbr>Guarantees (to other entities in the public and private sector, including to SOEs)\u003Cbr>Central bank (borrowed on behalf of the government)\u003Cbr>Non-guaranteed SOE debt Check box 1\u003Cbr>2\u003Cbr>3\u003Cbr>4\u003Cbr>5\u003Cbr>6\u003Cbr>7\u003Cbr>8 X\u003Cbr>X\u003Cbr>X\u003Cbr>X\u003Cbr>X\u003Cbr>X\u003Cbr>X\u003Cbr>\u003Cbr> |  |  |  |  |  |\n|  |  |  |  |  |  |\n|  | 1 | The central, state, and local governments plus central\u003Cbr>The country's coverage of public debt\u003Cbr>bank (borrowed on behalf of the government) |  |  |  |\n|  |  |  | Default | Used for the\u003Cbr>analysis | Reasons for deviations\u003Cbr>from the default settings |\n|  | 2\u003Cbr>3\u003Cbr>4\u003Cbr>5 | Other elements of the general government not captured in 1.\u003Cbr>SoE's debt (guaranteed and not guaranteed by the government) 1/\u003Cbr>PPP\u003Cbr>Financial market (the default value of 5 percent of GDP is the minimum value) | 0 percent of GDP\u003Cbr>2 percent of GDP\u003Cbr>35 percent of PPP stock\u003Cbr>5 percent of GDP | 0\u003Cbr>2.0\u003Cbr>2.9\u003Cbr>5 |  |\n|  |  | Total (2+3+4+5) (in percent of GDP) 9.9 |  |  |  |\n| 1/ The default shock of 2% of GDP will be triggered for countries whose government-guaranteed debt is not fully captured under the country's public debt definition (1.). If it is already included in the government debt (1.) and risks associated with SoE's debt not guaranteed by the government is assessed to be negligible, a country team may reduce this to 0% . |  |  |  |  |  |\n\n2. The contingent liability stress test is based on the default setting and includes contingent liabilities stemming from SOE debt (2 percent of GDP), PPP projects (2.9 percent of GDP) and financial market (5 percent of GDP) . PPP projects have not been formally compiled by the government. According to the PPI database of the World Bank, Nepal’s PPP contracts are estimated to account for 8.4 percent of GDP as of 2020. Already incorporated in the baseline debt figures is the Net Acquisition of  \n3. Nepal’s total public debt has been increasing over recent years, particularly in FY2019/20 due to the COVID-19 pandemic (Text Figure 1). Following a gradua","cbCaiipdbS6wOrB8","https://ap.wps.com/l/cbCaiipdbS6wOrB8","pdf",1173180,1,20,"English","en",105,"# Risk assessment for external and overall debt distress\n## External debt indicators and judgment\n## Remittances and foreign exchange role\n## Contingent liabilities and stress testing\n## Public debt dynamics and projections\n## Measurement notes for gross debt and TSA balance","[{\"question\":\"What is the assessed risk of debt distress for Nepal?\",\"answer\":\"Both external debt distress risk and overall risk of debt distress are rated as low.\"},{\"question\":\"Why did the staff apply judgment despite breaches under shock scenarios?\",\"answer\":\"Although two external debt indicators breach thresholds under three shocks, low PV ratios to GDP and low debt service to revenue, together with unusually high remittances, support a low-risk assessment.\"},{\"question\":\"What drives Nepal’s projected debt outlook through FY2024/25?\",\"answer\":\"Debt is projected to peak in FY2024/25 as fiscal deficits decline and financing shifts toward deeper domestic borrowing 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