INTERNATIONAL DEVELOPMENT ASSOCIATION INTERNATIONAL MONETARY FUND NEPAL JOINT WORLD BANK-IMF DEBT SUSTAINABILITY ANALYSIS May 2020 Prepared jointly by the staffs of the International Development Association (IDA) and the International Monetary Fund (IMF) Approved by Marcello Estevão (IDA), Anne-Marie Gulde Wolfe and Maria Gonzalez (IMF) Nepal: Joint Bank-Fund Debt Sustainability Analysis1 Risk of external debt distress Low 2 Overall risk of debt distress Low Granularity in the risk rating Not applicable Application of judgement No This DSA update reflects the COVID-19 shock, with a significant impact on growth in FY2019/20 and FY2020/21.3 Macroeconomic projections Remittances have fallen considerably, tourist arrivals collapsed, and domestic activities have dropped due to containment measures that include a nationwide lockdown. Given limited domestic financing capacity, Nepal seeks external financing sources to fill its financing gap. In addition to the RCF (US$214 million), the World Bank has approved a $29 million COVID-19 Emergency Response and Health Systems Preparedness Project and the Asian Development Bank is processing a pandemic response loan under the Countercyclical Support Facility for up to US$250 million. The IMF also provided Financing strategy debt relief under the Catastrophe Containment and Relief Trust (US$ 3.9 million). The remaining financing gap will be financed by support from development partners or reserve drawdowns. The authorities also intend to request debt service reprofiling from official bilateral creditors (including export-import banks) over the period May 1 and December 31, 2020, which would free-up resources of up to US$31 million for the authorities’ COVID-19 response. Yes, standard multiplier analysis (that does not consider COVID- Realism tools flagged 19 impact) suggests pessimistic growth in 2020 despite large fiscal stimulus. Mechanical risk rating under the external Low DSA Mechanical risk rating under the public DSA Low 1 Debt coverage has not changed from the February 2020 DSA. 2 Nepal’s composite indicator score is 3.28, which signals a strong debt-carrying capacity. 3 The macroframework underlying this DSA update is the same as that included in the staff report of the 2020 RCF request, based on available information at the time. However, the COVID-19 economic impact and policy response are rapidly evolving, and risks are heavily tilted to the downside. This DSA does not incorporate the potential debt service reprofiling of official bilateral debt. This DSA updates the joint World Bank-Fund analysis of February 2020 to reflect Nepal’s recent economic development, which have been considerably affected by the COVID-19 pandemic and related containment policies. Even under the COVID-19 pandemic, Nepal’s debt is assessed to remain at a low risk of external and overall debt distress, unchanged from the 2020 DSA 4. None of the debt and debt service indicators breach the indicative threshold values. However, given elevated gross financing needs in Nepal, a deeper global slowdown could negatively affect Nepal’s risk of debt distress. The Nepalese authorities should continue to: (i) improve domestic productivity; (ii) streamline bureaucratic processes; (iii) compile PPP projects and private sector external debt; (iv) implement a medium-term debt strategy and develop the government bond market; and (v) improve subnational governments’ public financial management and reporting, and implement a prudent framework for subnational borrowing. 4 IMF Country Report No 20/96, April 2020 2 Table 1. Nepal: External Debt Sustainability Framework, Baseline Scenario, 2019-2040 (In percent of GDP, unless otherwise indicated) Actual 9/ Projections Average 8/ Historical Projections 2019 2020 2021 2022 2023 2024 2025 2030 2040 External debt (nominal) 1/ 17.1 20.8 21.0 20.8 21.0 21.0 20.9 20.1 14.9 18.7 20.7 Definition of external/domestic debt Currency-based of which: public and publicly guaranteed (PPG) 17.0 20.6 20.8 20.6 20.7 20.7 20.5 19.5 13.9 18.7 20.3 Is there a material difference between the No two criteria? Change in external debt -0.2 3.7 0.2 -0.2 0.2 0.0 -0.1 -0.3 -0.8 Identified net debt-creating flows 6.4 7.1 5.9 4.0 3.6 3.2 2.6 2.0 2.7 -2.6 3.3 Non-interest current account deficit 7.6 7.4 6.9 5.6 5.0 4.6 4.1 3.5 4.1 -0.6 4.7 Deficit in balance of goods and services 37.5 31.0 31.1 29.1 28.2 27.4 26.6 23.8 15.9 29.8 27.0 Exports 8.7 7.7 7.7 8.3 8.5 8.6 8.7 9.1 10.1 Debt Accumulation Imports 46.2 38.7 38.8 37.5 36.6 36.0 35.3 32.9 26.0 3.5 55 Net current transfers (negative = inflow) -28.7 -22.3 -22.8 -22.2 -21.8 -21.5 -21.1 -18.9 -15.8 -29.2 -20.9 of which: official -1.0 -1.1 -1.2 -1.2 -1.2 -1.2 -1.2 -1.1 -1.1 3.0 54 Other current account flows (negative = net inflow) -1.3 -1.3 -1.3 -1.3 -1.4 -1.4 -1.4 -1.4 4.0 -1.2 -1.4 Net FDI (negative = inflow) -0.4 -0.3 -0.5 -0.5 -0.5 -0.6 -0.7 -0.8 -0.8 -0.4 -0.6 53 2.5 Endogenous debt dynamics 2/ -0.8 0.0 -0.5 -1.1 -0.9 -0.8 -0.8 -0.8 -0.6 Contribution from nominal interest rate 0.1 0.1 0.2 0.2 0.2 0.2 0.2 0.2 0.2 52 2.0 Contribution from real GDP growth -1.2 -0.2 -0.7 -1.2 -1.0 -1.0 -1.0 -1.0 -0.8 51 Contribution from price and exchange rate changes 0.2 … … … … … … … … 1.5 Residual 3/ -6.6 -3.4 -5.7 -4.2 -3.5 -3.1 -2.7 -2.2 -3.6 1.4 -3.1 50 of which: exceptional financing 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.0 49 Sustainability indicators 0.5 48 PV of PPG external debt-to-GDP ratio 12.4 13.8 13.7 13.5 13.4 13.3 13.1 11.9 8.7 PV of PPG external debt-to-exports ratio 142.7 179.2 177.9 161.3 158.1 154.6 150.0 131.0 85.9 0.0 47 PPG debt service-to-exports ratio 8.0 9.4 9.4 8.6 8.7 9.0 8.5 8.2 5.3 2020 2022 2024 2026 2028 2030 PPG debt service-to-revenue ratio 2.8 3.2 3.1 3.0 3.1 3.2 3.1 3.1 2.2 Gross external financing need (Million of U.S. dollars) 2427.8 2570.2 2532.3 2264.6 2228.0 2215.0 2111.7 2745.7 6809.1 Debt Accumulation Grant-equivalent financing (% of GDP) Key macroeconomic assumptions Grant element of new borrowing (% right scale) Real GDP growth (in percent) 7.1 1.0 3.5 6.5 5.4 5.2 5.2 5.2 5.2 4.9 4.8 GDP deflator in US dollar terms (change in percent) -1.3 3.5 3.8 2.8 2.4 2.0 2.0 2.3 2.3 4.3 2.6 Effective interest rate (percent) 4/ 0.8 0.9 0.9 0.9 1.0 1.0 1.0 1.0 1.2 1.0 1.0 External debt (nominal) 1/ Growth of exports of G&S (US dollar terms, in percent) 2.5 -7.0 7.8 18.3 9.5 8.8 9.1 8.7 8.8 5.6 8.1 of which: Private Growth of imports of G&S (US dollar terms, in percent) 5.6 -12.3 7.6 5.7 5.4 5.5 5.2 6.5 6.7 12.9 4.4 22 Grant element of new public sector borrowing (in percent) ... 49.2 52.4 52.4 52.5 52.5 52.4 52.6 52.1 ... 52.2 Government revenues (excluding grants, in percent of GDP) 24.8 22.8 23.7 23.7 23.7 23.8 23.8 23.9 24.1 19.3 23.7 21 Aid flows (in Million of US dollars) 5/ 368.3 977.1 892.1 970.0 1053.1 1078.9 1108.5 1411.9 2143.1 Grant-equivalent financing (in percent of GDP) 6/ ... 3.2 2.6 2.6 2.6 2.5 2.4 2.1 1.5 ... 2.4 21 Grant-equivalent financing (in percent of external financing) 6/ ... 60.6 72.3 72.0 71.6 72.5 73.4 72.6 84.4 ... 70.8 Nominal GDP (Million of US dollars) 30690.3 32084.0 34460.5 37719.9 40697.9 43685.5 46876.7 68099.5 142125.8 Nominal dollar GDP growth 5.7 4.5 7.4 9.5 7.9 7.3 7.3 7.6 7.6 9.4 7.5 20 Memorandum items: 20 PV of external debt 7/ 12.5 14.0 14.0 13.7 13.7 13.6 13.5 12.5 9.7 In percent of exports 144.4 181.6 180.9 164.5 161.7 158.6 154.4 137.5 95.8 19 Total external debt service-to-exports ratio 8.0 11.3 11.8 11.2 11.8 12.5 12.5 14.2 14.7 PV of PPG external debt (in Million of US dollars) 3790.4 4425.3 4737.0 5078.7 5450.7 5795.5 6137.4 8111.3 12314.4 19 (PVt-PVt-1)/GDPt-1 (in percent) 2.1 1.0 1.0 1.0 0.8 0.8 0.6 0.2 2020 2022 2024 2026 2028 2030 Non-interest current account deficit that stabilizes debt ratio 7.8 3.7 6.7 5.7 4.8 4.6 4.2 3.8 4.9 Sources: Country authorities; and staff estimates and projections. 1/ Includes both public and private sector external debt. 2/ Derived as [r - g - ρ(1+g)]/(1+g+ρ+gρ) times previous period debt ratio, with r = nominal interest rate; g = real GDP growth rate, and ρ = growth rate of GDP deflator in U.S. dollar terms. 3/ Includes exceptional financing (ie. changes in arrears and debt relief); changes in gross foreign assets; and valuation adjustments. For projections also includes contribution from price and exchange rate changes. The residuals in this table are mainly related to reserve drawdown and net errors and omissions. For example, there were reserve drawdown of 4.2% of GDP and positive net E&Os of 2.7% of GDP in FY2018/19. 4/ Current-year interest payments divided by previous period debt stock. 5/ Defined as grants, concessional loans, and debt relief. 6/ Grant-equivalent financing includes grants provided directly to the government and through new borrowing (difference between the face value and the PV of new debt). 7/ Assumes that PV of private sector debt is equivalent to its face value. 8/ Historical averages are generally derived over the past 10 years, subject to data availability, whereas projections averages are over the first year of projection and the next 10 years. 9/ Fiscal year. For example, year 2019 means FY2018/19 (mid-July 2018 to mid-July 2019). 3 Table 2. Nepal: Public Sector Debt Sustainability Framework, Baseline Scenario, 2019-2040 (In percent of GDP, unless otherwise indicated) Actual 8/ Projections Average 6/ 2019 2020 2021 2022 2023 2024 2025 2030 2040 Historical Projections Public sector debt 1/ 30.1 38.0 42.4 43.8 45.3 46.7 47.8 49.7 50.2 30.6 46.3 Definition of external/domestic of which: external debt 17.0 20.6 20.8 20.6 20.7 20.7 20.5 19.5 13.9 18.7 20.3 Currency-based debt of which: local-currency denominated 27.3 Change in public sector debt -0.2 7.9 4.5 1.4 1.5 1.3 1.1 0.3 -0.2 Is there a material difference Identified debt-creating flows 0.8 5.3 3.6 0.5 0.6 0.4 0.2 -0.5 -0.8 -2.0 0.8 No between the two criteria? Primary deficit 4.0 6.6 5.8 3.8 3.5 3.2 3.1 2.6 2.4 0.5 3.6 Revenue and grants 26.0 24.0 25.2 25.2 25.1 25.2 25.2 25.1 25.3 21.3 25.1 of which: grants 1.2 1.2 1.5 1.5 1.4 1.4 1.4 1.2 1.2 Public sector debt 1/ Primary (noninterest) expenditure 30.0 30.6 31.0 29.0 28.6 28.4 28.3 27.7 27.7 21.9 28.6 Automatic debt dynamics -3.2 -1.3 -2.2 -3.3 -2.9 -2.8 -2.9 -3.1 -3.2 of which: local-currency denominated Contribution from interest rate/growth differential -2.5 -1.3 -2.2 -3.3 -2.9 -2.8 -2.9 -3.1 -3.2 of which: foreign-currency denominated of which: contribution from average real interest rate -0.5 -1.0 -0.9 -0.7 -0.7 -0.6 -0.6 -0.6 -0.7 of which: contribution from real GDP growth -2.0 -0.3 -1.3 -2.6 -2.3 -2.3 -2.3 -2.5 -2.5 60 Contribution from real exchange rate depreciation -0.7 ... ... ... ... ... ... ... ... 50 Other identified debt-creating flows 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Privatization receipts (negative) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 40 Recognition of contingent liabilities (e.g., bank recapitalization) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 30 Debt relief (HIPC and other) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Other debt creating or reducing flow (please specify) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 20 Residual 7/ -0.9 2.6 0.8 0.9 0.9 1.0 0.9 0.8 0.5 0.9 1.0 10 Sustainability indicators 0 PV of public debt-to-GDP ratio 2/ 25.1 31.4 35.6 37.0 38.3 39.5 40.6 42.4 45.1 2020 2022 2024 2026 2028 2030 PV of public debt-to-revenue and grants ratio 96.4 130.8 141.5 146.7 152.4 156.8 161.1 168.8 177.9 Debt service-to-revenue and grants ratio 3/ 24.4 24.3 24.2 28.5 30.6 33.5 36.8 40.6 46.8 Gross financing need 4/ 10.3 12.4 11.9 11.0 11.2 11.7 12.4 12.8 14.2 of which: held by residents of which: held by non-residents Key macroeconomic and fiscal assumptions 1 Real GDP growth (in percent) 7.1 1.0 3.5 6.5 5.4 5.2 5.2 5.2 5.2 4.9 4.8 1 Average nominal interest rate on external debt (in percent) 0.8 0.8 0.9 0.9 0.9 0.9 1.0 0.9 0.9 1.0 0.9 1 Average real interest rate on domestic debt (in percent) -2.6 -6.3 -3.9 -2.6 -2.1 -1.6 -1.5 -1.5 -1.5 -3.2 -2.4 1 Real exchange rate depreciation (in percent, + indicates depreciation) -4.7 … ... ... ... ... ... ... ... -2.2 ... 1 1 n.a. Inflation rate (GDP deflator, in percent) 6.8 6.7 6.5 5.8 5.6 5.3 5.3 5.6 5.6 8.1 5.8 0 Growth of real primary spending (deflated by GDP deflator, in percent) 2.2 3.1 4.9 -0.3 3.9 4.5 4.8 5.2 5.2 10.6 4.1 0 Primary deficit that stabilizes the debt-to-GDP ratio 5/ 4.1 -1.3 1.3 2.4 2.0 1.9 2.0 2.3 2.6 3.5 1.8 0 PV of contingent liabilities (not included in public sector debt) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0 0 2020 2022 2024 2026 2028 2030 Sources: Country authorities; and staff estimates and projections. bank, government-guaranteed debt, non-guaranteed SOE debt . Definition of external debt is Currency-based. 1/ Coverage of debt: The central, state, and local governments plus extra budgetary funds, central 2/ The underlying PV of external debt-to-GDP ratio under the public DSA differs from the external DSA with the size of differences depending on exchange rates projections. 3/ Debt service is defined as the sum of interest and amortization of medium and long-term, and short-term debt. 4/ Gross financing need is defined as the primary deficit plus debt service plus the stock of short-term debt at the end of the last period and other debt creating/reducing flows. 5/ Defined as a primary deficit minus a change in the public debt-to-GDP ratio ((-): a primary surplus), which would stabilizes the debt ratio only in the year in question. 6/ Historical averages are generally derived over the past 10 years, subject to data availability, whereas projections averages are over the first year of projection and the next 10 years. 7/ The residuals in this table are mainly related to net acquisition of financial assets. For example, the projection of net acquisition of financial assets in FY2019/20 is 1.6% of GDP. 8/ Fiscal year. For example, year 2019 means FY2018/19 (mid-July 2018 to mid-July 2019). 4 Figure 1. Nepal: Indicators of Public and Publicly Guaranteed External Debt under Alternatives Scenarios, 2020-2030 PV of debt-to GDP ratio PV of debt-to-exports ratio 60 300 50 250 40 200 30 150 20 100 10 50 0 0 -10 -50 Most extreme shock: Non-debt flows Most extreme shock: Exports -20 -100 2020 2022 2024 2026 2028 2030 2020 2022 2024 2026 2028 2030 Debt service-to-exports ratio Debt service-to-revenue ratio 25 25 20 20 15 15 10 10 5 5 Most extreme shock: Exports Most extreme shock: Non-debt flows 0 0 2020 2022 2024 2026 2028 2030 2020 2022 2024 2026 2028 2030 Baseline Historical scenario Most extreme shock 1/ Threshold Customization of Default Settings Borrowing assumptions on additional financing needs resulting from the stress tests* Size Interactions Default User defined Shares of marginal debt No No External PPG MLT debt 100% Tailored Stress Terms of marginal debt Combined CL No Avg. nominal interest rate on new borrowing in USD 0.9% 0.9% Natural disaster No No USD Discount rate 5.0% 5.0% Commodity price n.a. n.a. Avg. maturity (incl. grace period) 36 36 Market financing n.a. n.a. Avg. grace period 6 6 Note: "Yes" indicates any change to the size or interactions of * Note: All the additional financing needs generated by the shocks under the stress tests are the default settings for the stress tests. "n.a." indicates that the assumed to be covered by PPG external MLT debt in the external DSA. Default terms of marginal stress test does not apply. debt are based on baseline 10-year projections. Sources: Country authorities; and staff estimates and projections. 1/ The most extreme stress test is the test that yields the highest ratio in or before 2030. The stress test with a one-off breach is also presented (if any), while the one-off breach is deemed away for mechanical signals. When a stress test with a one-off breach happens to be the most exterme shock even after disregarding the one-off breach, only that stress test (with a one-off breach) would be presented. 2/ The magnitude of shocks used for the commodity price shock stress test are based on the commodity prices outlook prepared by the IMF research department. 5 Figure 2. Nepal: Indicators of Public Debt Under Alternative Scenarios, 2020-2030 PV of Debt-to-GDP Ratio 80 70 60 50 40 30 20 Most extreme shock: Growth 10 0 2020 2022 2024 2026 2028 2030 PV of Debt-to-Revenue Ratio Debt Service-to-Revenue Ratio 250 60 50 200 40 150 30 100 20 50 Most extreme shock: Growth 10 Most extreme shock: Growth 0 0 2020 2022 2024 2026 2028 2030 2020 2022 2024 2026 2028 2030 Baseline Most extreme shock 1/ TOTAL public debt benchmark Historical scenario Borrowing assumptions on additional financing needs resulting from the stress Default User defined tests* Shares of marginal debt External PPG medium and long-term 16% 16% Domestic medium and long-term 57% 57% Domestic short-term 27% 27% Terms of marginal debt External MLT debt Avg. nominal interest rate on new borrowing in USD 0.9% 0.9% Avg. maturity (incl. grace period) 36 36 Avg. grace period 6 6 Domestic MLT debt Avg. real interest rate on new borrowing -1.8% -1.8% Avg. maturity (incl. grace period) 7 7 Avg. grace period 0 0 Domestic short-term debt Avg. real interest rate -1.8% -1.8% * Note: The public DSA allows for domestic financing to cover the additional financing needs generated by the shocks under the stress tests in the public DSA. Default terms of marginal debt are based on baseline 10-year projections. Sources: Country authorities; and staff estimates and projections. 1/ The most extreme stress test is the test that yields the highest ratio in or before 2030. The stress test with a one-off breach is also presented (if any), while the one-off breach is deemed away for mechanical signals. When a stress test with a one-off breach happens to be the most exterme shock even after disregarding the one-off breach, only that stress test (with a one-off breach) would be presented. 6 Figure 3. Nepal: Drivers of Debt Dynamics - Baseline Scenario External debt Gross Nominal PPG External Debt Debt-creating flows Unexpected Changes in Debt 1/ (in percent of GDP; DSA vintages) (percent of GDP) (past 5 years, percent of GDP) Current DSA 40 80 Residual 20 Previous DSA proj. 30 70 DSA-2014 15 Interquartile range (25-75) Price and 20 60 exchange rate 10 50 10 Real GDP Change in PPG growth 5 40 0 debt 3/ 30 Nominal 0 interest rate -10 20 Median -5 Current -20 10 account + FDI -30 -10 0 Change in 5-year 5-year 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 PPG debt 3/ Contribution of Distribution across LICs 2/ historical projected -15 unexpected change change Public debt Gross Nominal Public Debt Debt-creating flows Unexpected Changes in Debt 1/ (in percent of GDP; DSA vintages) (percent of GDP) (past 5 years, percent of GDP) Residual 40 Current DSA Previous DSA proj. 20 DSA-2014 Interquartile 80 Other debt range (25-75) creating flows 15 70 20 Real Exchange 60 rate depreciation 10 50 Real GDP growth Change in debt 40 5 0 30 Real interest rate 20 0 Primary deficit 10 -20 -5 Median 0 Change in debt 5-year 5-year Distribution across LICs 2/ 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 historical projected Contribution of -10 unexpected change change 1/ Difference between anticipated and actual contributions on debt ratios. 2/ Distribution across LICs for which LIC DSAs were produced. 3/ Given the relatively low private external debt for average low-income countries, a ppt change in PPG external debt should be largely explained by the drivers of the external debt dynamics equation. 7 Figure 4. Nepal: Realism tools 3-Year Adjustment in Primary Balance Fiscal Adjustment and Possible Growth Paths 1/ (Percentage points of GDP) 10 1 14 Distribution 1/ 9 12 Projected 3-yr adjustment 8 3-year PB adjustment greater 0 than 2.5 percentage points of In percentage points of GDP 10 7 GDP in approx. top quartile 6 In percent 8 5 -1 6 4 3 4 -2 2 2 1 0 0 -3 more -4.5 -4.0 -3.5 -3.0 -2.5 -2.0 -1.5 -1.0 -0.5 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 5.5 6.0 6.5 7.0 7.5 8.0 2014 2015 2016 2017 2018 2019 2020 2021 Baseline Multiplier = 0.2 Multiplier = 0.4 Multiplier = 0.6 Multiplier = 0.8 1/ Data cover Fund-supported programs for LICs (excluding emergency financing) approved since 1990. The 1/ Bars refer to annual projected fiscal adjustment (right-hand side scale) and lines show possible real size of 3-year adjustment from program inception is found on the horizontal axis; the percent of sample is GDP growth paths under different fiscal multipliers (left-hand side scale). found on the vertical axis. Public and Private Investment Rates Contribution to Real GDP growth (percent of GDP) (percent, 5-year average) 32 6 30 28 5 26 24 22 4 20 18 16 3 14 12 2 10 8 6 1 4 2 0 0 Historical Projected (Prev. DSA) Projected (Curr. DSA) 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Gov. Invest. - Prev. DSA Gov. Invest. - Curr. DSA Contribution of other factors Priv. Invest. - Prev. DSA Priv. Invest. - Curr. DSA Contribution of government capital 8 Table 3. Nepal: Sensitivity Analysis for Key Indicators of Public and Publicly Guaranteed External Debt, 2020-2030 (In percent) Projections 1/ 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 PV of debt-to GDP ratio Baseline 14 14 13 13 13 13 13 13 12 12 12 A. Alternative Scenarios A1. Key variables at their historical averages in 2020-2030 2/ 14 10 7 4 2 0 -2 -3 -5 -6 -7 0 #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A B. Bound Tests B1. Real GDP growth 14 14 14 14 14 14 14 14 13 13 13 B2. Primary balance 14 14 14 14 14 14 14 13 13 13 13 B3. Exports 14 14 15 15 15 14 14 14 14 13 13 B4. Other flows 3/ 14 16 17 17 17 17 16 16 16 15 15 B5. Depreciation 14 17 12 12 12 12 12 12 12 12 12 B6. Combination of B1-B5 14 16 17 16 16 16 16 15 15 15 14 C. Tailored Tests C1. Combined contingent liabilities 14 14 14 14 14 14 14 14 14 14 13 C2. Natural disaster 14 15 15 15 15 15 15 15 14 14 14 C3. Commodity price n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Threshold 55 55 55 55 55 55 55 55 55 55 55 PV of debt-to-exports ratio Baseline 179 178 161 158 154 150 146 143 139 135 131 A. Alternative Scenarios A1. Key variables at their historical averages in 2020-2030 2/ 179 127 81 50 22 -2 -21 -38 -54 -67 -78 0 179 167 148 140 131 123 115 108 102 96 90 B. Bound Tests B1. Real GDP growth 179 178 161 158 154 150 146 143 139 135 131 B2. Primary balance 179 180 167 165 162 158 154 152 149 145 140 B3. Exports 179 202 239 234 228 221 215 210 204 197 190 B4. Other flows 3/ 179 204 209 203 198 191 185 181 175 168 161 B5. Depreciation 179 178 116 115 114 111 108 107 105 104 102 B6. Combination of B1-B5 179 214 186 225 219 212 206 201 195 188 181 C. Tailored Tests C1. Combined contingent liabilities 179 187 172 170 167 163 160 157 154 151 146 C2. Natural disaster 179 194 180 178 176 172 169 167 165 161 158 C3. Commodity price n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Threshold 240 240 240 240 240 240 240 240 240 240 240 Debt service-to-exports ratio Baseline 9 9 8 9 9 8 9 9 9 9 8 A. Alternative Scenarios A1. Key variables at their historical averages in 2020-2030 2/ 9 9 8 7 7 6 6 6 4 2 1 0 9 9 8 8 8 7 8 8 6 5 3 B. Bound Tests B1. Real GDP growth 9 9 8 9 9 8 9 9 9 9 8 B2. Primary balance 9 9 9 9 9 9 9 9 9 9 9 B3. Exports 9 10 12 12 12 12 13 13 12 13 12 B4. Other flows 3/ 9 9 9 9 10 9 10 10 10 11 10 B5. Depreciation 9 9 8 8 8 8 9 9 8 6 6 B6. Combination of B1-B5 9 10 11 11 11 11 12 12 12 12 11 C. Tailored Tests C1. Combined contingent liabilities 9 9 9 9 9 9 10 9 9 9 8 C2. Natural disaster 9 10 9 9 9 9 10 10 9 9 9 C3. Commodity price n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Threshold 21 21 21 21 21 21 21 21 21 21 21 Debt service-to-revenue ratio Baseline 3 3 3 3 3 3 3 3 3 3 3 A. Alternative Scenarios A1. Key variables at their historical averages in 2020-2030 2/ 3 3 3 3 2 2 2 2 1 1 0 0 3 3 3 3 3 3 3 3 2 2 1 B. Bound Tests B1. Real GDP growth 3 3 3 3 3 3 4 4 3 3 3 B2. Primary balance 3 3 3 3 3 3 3 3 3 3 3 B3. Exports 3 3 3 3 3 3 3 3 3 4 3 B4. Other flows 3/ 3 3 3 3 3 3 4 4 4 4 4 B5. Depreciation 3 4 4 4 4 4 4 4 4 3 3 B6. Combination of B1-B5 3 3 3 3 4 3 4 4 4 4 4 C. Tailored Tests C1. Combined contingent liabilities 3 3 3 3 3 3 3 3 3 3 3 C2. Natural disaster 3 3 3 3 3 3 3 3 3 3 3 C3. Commodity price n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Threshold 23 23 23 23 23 23 23 23 23 23 23 Sources: Country authorities; and staff estimates and projections. 1/ A bold value indicates a breach of the threshold. 2/ Variables include real GDP growth, GDP deflator (in U.S. dollar terms), non-interest current account in percent of GDP, and non-debt creating flows. 3/ Includes official and private transfers and FDI. 9 Table 4. Nepal: Sensitivity Analysis for Key Indicators of Public Debt , 2020-2030 Projections 1/ 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 PV of Debt-to-GDP Ratio Baseline 31 36 37 38 39 41 41 41 42 42 42 A. Alternative Scenarios A1. Key variables at their historical averages in 2020-2030 2/ 31 30 29 27 26 26 25 24 23 22 22 0 #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A B. Bound Tests B1. Real GDP growth 31 38 42 44 47 49 51 52 53 55 56 B2. Primary balance 31 38 42 43 44 45 45 45 45 45 45 B3. Exports 31 36 38 40 41 42 42 43 43 43 43 B4. Other flows 3/ 31 38 41 42 43 44 44 45 45 45 45 B5. Depreciation 31 37 36 36 37 37 36 36 35 35 34 B6. Combination of B1-B5 31 36 38 38 39 40 40 40 41 41 41 C. Tailored Tests C1. Combined contingent liabilities 31 44 44 45 46 46 46 46 46 46 46 C2. Natural disaster 31 46 46 47 48 49 49 49 49 49 50 C3. Commodity price n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. TOTAL public debt benchmark 70 70 70 70 70 70 70 70 70 70 70 PV of Debt-to-Revenue Ratio Baseline 131 141 147 152 157 161 163 164 166 167 169 A. Alternative Scenarios A1. Key variables at their historical averages in 2020-2030 2/ 131 119 114 110 105 102 99 95 92 90 87 0 24 21 18 18 19 22 23 21 21 22 24 B. Bound Tests B1. Real GDP growth 131 149 165 176 186 195 201 206 212 217 221 B2. Primary balance 131 152 166 170 173 177 177 177 178 179 179 B3. Exports 131 143 152 158 162 166 168 169 170 172 173 B4. Other flows 3/ 131 150 163 168 172 176 177 178 179 179 180 B5. Depreciation 131 147 143 146 146 146 144 142 140 138 137 B6. Combination of B1-B5 131 144 150 151 154 157 159 160 161 163 164 C. Tailored Tests C1. Combined contingent liabilities 131 175 176 180 182 184 184 184 184 184 184 C2. Natural disaster 131 181 184 188 191 194 195 195 196 197 197 C3. Commodity price n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Debt Service-to-Revenue Ratio Baseline 24 24 28 31 33 37 39 38 38 39 41 A. Alternative Scenarios A1. Key variables at their historical averages in 2020-2030 2/ 24 24 21 21 22 23 23 21 20 20 20 0 24 21 18 18 19 22 23 21 21 22 24 B. Bound Tests B1. Real GDP growth 24 25 31 36 40 44 48 48 49 51 53 B2. Primary balance 24 24 32 37 38 41 43 42 42 43 43 B3. Exports 24 24 28 31 34 37 39 38 38 40 41 B4. Other flows 3/ 24 24 29 31 34 37 39 38 39 40 41 B5. Depreciation 24 23 27 27 31 34 37 36 36 37 38 B6. Combination of B1-B5 24 24 28 31 33 36 39 38 38 39 40 C. Tailored Tests C1. Combined contingent liabilities 24 24 41 38 39 42 45 44 44 44 44 C2. Natural disaster 24 25 43 40 41 45 47 46 47 47 47 C3. Commodity price n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Sources: Country authorities; and staff estimates and projections. 1/ A bold value indicates a breach of the benchmark. 2/ Variables include real GDP growth, GDP deflator and primary deficit in percent of GDP. 3/ Includes official and private transfers and FDI. 10