First Business News Portal in English from Nepal
KATHMANDU: In a significant stride towards enhancing Nepal’s economic visibility on the global stage, Fitch Ratings, a world-renowned credit rating agency, has commenced the comprehensive sovereign credit rating process for the nation. This initiative places Nepal among the top three in the world, signaling a pivotal moment in the country’s economic landscape.
The credit rating endeavor follows a landmark agreement forged five years ago between the Nepalese government and Fitch, allowing the agency to extend its rating work beyond the initial five-year period.
The collaboration, established in 2019, aimed to present credible financial data about Nepal’s economic status to the international community. Notably, this strategic partnership received support from financial heavyweights, Standard Chartered Bank and the Bank of England, amplifying its significance.
Initially projected for completion within a year, the comprehensive credit rating process faced delays, primarily attributed to the global impact of the COVID-19 pandemic. However, recent efforts spearheaded by Finance Minister Dr. Prakash Sharan Mahat have reinvigorated the rating process, underscoring the government’s commitment to elevating Nepal’s economic standing.
Fitch, with financial backing from the Financial Comptroller General’s Office (FCGO) and collaborative efforts with the government, has made significant strides in advancing the credit rating process. The allocated budget for this ambitious undertaking is anticipated to surpass NPR 1 billion, with the FCGO facilitating all payments.
A key component of Fitch’s strategy involves an extensive outreach program, fostering engagement with government officials to facilitate the exchange of information and brief them on the necessary data and processes.
The credit rating holds paramount importance for Nepal’s overall “financial position,” serving as a mandatory requirement for both the government and the private sector when seeking commercial loans from abroad.
While Nepal has historically relied on borrowing from various multilateral financial institutions, the growing demands of development projects have necessitated a more diverse approach to external funding.
In this context, a credible credit rating becomes imperative, acting as a testament to the nation’s economic stability and creditworthiness.
Foreign investors keen on investing in Nepal emphasize the significance of credit ratings in their decision-making process. The rating serves as a crucial parameter for evaluating the ease with which funds can be repatriated from the country once an investment is made.
In essence, the credit rating becomes a linchpin for both lenders and investors, providing a comprehensive assessment of a nation’s economic health.
As the sovereign credit rating process unfolds, Nepal anticipates not only a strengthened economic standing but also increased accessibility to global financial markets.
The transparency and credibility brought forth by a robust credit rating are expected to open new avenues for foreign investments, ultimately contributing to the nation’s socio-economic development. The ongoing efforts underscore Nepal’s commitment to fostering a resilient and dynamic economy that can thrive in the international arena.
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