Public debt lessons from Pakistan and Sri Lanka
While the doomsday predictions of Nepal becoming another Sri Lanka turned out far-fetched, can the debt distress experienced by Sri Lanka and Pakistan offer lessons for Nepal’s public finances? A closer investigation of public debt in three countries—Nepal, Pakistan and Sri Lanka—offers some answers.
First, these three South Asian nations differ markedly in their public debt levels and other public finance characteristics. While assessed as having a low risk of debt distress, Nepal has witnessed a surge in its public debt holding, from about 25 percent of GDP in the fiscal year 2014-15 to 42.7 percent in 2023-24. However, despite the peculiarities of every nation, some common patterns let us draw a few lessons.