January 18: China's Vice Premier Liu He has warned about the impact of "spillover effects" of Western interest rate hikes on emerging economies.

According to AFP, Liu drew the attention of world leaders during the World Economic Forum in Davos, Switzerland on Tuesday about the spillover effects of major countries' rate hikes on emerging market and developing countries so as not to add to more debt or financial risks.

The news agency added that the US Federal Reserve has hiked its benchmark lending rate at a pace unheard of since the 1980s over the last year to tame soaring inflation, while the European Central Bank has also raised borrowing costs.

The US moves have strengthened the value of the dollar, raising the cost of borrowing for countries with debt priced in greenbacks. They also encourage capital flight from emerging countries and dampen economic growth there, AFP added.

Liu also called for an end "to Cold War mentality" as he spoke in favour of more global cooperation amid soaring tensions between Washington and Beijing over economic policy as well as Taiwan.

"We need to uphold the right principles and uphold the effective international economic order. We have to abandon the Cold War mentality," AFP quoted him as saying.

China's export-oriented economy is seen as being particularly threatened by changes to the global trading system, with the United States in particular looking to shore up its domestic industry and limit trade with Beijing in key strategic sectors, according to AFP.

The concerns raised by the Chinese vice premier is also relevant in the context of Nepal as the country is forced to pay an additional amount of public debt of Rs 5.52 billion in the first quarter of the current fiscal year  because of the change in foreign exchange rate.

The accumulated public debt of the Government of Nepal stands at Rs 2007.84 billion in the review period.

According to a report published by the Public Debt Management Office of the Government of Nepal, the country’s outstanding foreign debt in the first quarter of the current fiscal year is Rs 1050.23 billion while the internal debt is Rs 957.61 billion.

Comparing this figure with the data of mid-July, the country’s external debt has increased by Rs 24.38 billion while the internal debt has declined by Rs 29.83 billion.

The country’s Gross Domestic Product (GDP) at present is Rs 4851.62 billion. Compared to the  GDP, Nepal’s public debt stands at 41.38 percent.