Nepal Resumes Sovereign Credit Rating Process Amid Concerns Over Conventional Policies

Nepal has reinitiated the process for obtaining a Sovereign Credit Rating (SCR) after several years of delay. A two-member team from Fitch Ratings Agency (FRA), one of the leading credit rating organizations based in the United States, has begun consultations with government officials. The team has raised concerns regarding the government's approach to revenue mobilization, capital expenditure, and foreign aid management.

The Ministry of Finance (MoF) noted that the team is reviewing Nepal's macroeconomic trends from the past five to ten years. They aim to complete their assessment within the next two months and will issue a preliminary report on Nepal’s SCR in three weeks. A positive credit rating could enable the government and private sector to issue international bonds and attract foreign investment by enhancing investor confidence.

Currently, Afghanistan, Bhutan, and Nepal are the only SAARC nations without sovereign credit ratings. The government had initially planned to acquire an SCR through the fiscal year 2018/19 budget and had reached an agreement with FRA for the task, alongside a technical assistance agreement with the British International Cooperation Agency (now UK Aid) and Standard Chartered Bank as the rating consultant. However, the COVID-19 pandemic led to a suspension of the process.

FRA has expressed concerns over Nepal’s traditional fiscal policies, criticizing the government for its reluctance to take risks and adopt innovative measures. The FRA representatives have highlighted the slow economic progress due to the government’s conservative approach in addressing both domestic and international economic challenges.