Nepal begins preparations for Sovereign Credit Rating, aims for improved assessment

KATHMANDU: Nepal has formally initiated preparations for this year’s sovereign credit rating, with the Ministry of Finance convening a high-level meeting on Sunday to outline strategies for presenting the country’s economic achievements in an organized manner.

The meeting, chaired by Deputy Prime Minister and Finance Minister Bishnu Prasad Paudel, emphasized the need to highlight Nepal’s progress across key economic and governance fronts. Paudel instructed concerned agencies to ensure that the preparation conveys a strong message of Nepal’s notable advancements within the past year.

Focus Areas for the Rating

According to the ministry, discussions prioritized showcasing Nepal’s reforms in economic management, policy and legal frameworks, and governance improvements. Officials also underscored achievements in political stability, road connectivity, tourism growth, and hydropower development, which are expected to play a pivotal role in shaping international perception of Nepal’s creditworthiness.

The meeting was attended by National Planning Commission Vice-Chairperson Prof. Dr. Shivraj Adhikari, NPC member Dr. Prakash Kumar Shrestha, Nepal Rastra Bank Governor Dr. Bishwanath Paudel, Finance Secretary Ghanshyam Upadhyay, Revenue Secretary Dinesh Kumar Ghimire, among others. Mahesh Bhattarai, head of the Economic Policy Analysis Division, presented the current progress made in preparing for the rating process.

Role of Fitch Ratings

International rating agency Fitch Ratings, which has been assessing Nepal’s sovereign creditworthiness, is scheduled to send a team to Kathmandu in the coming weeks to conduct an on-the-ground evaluation of Nepal’s macroeconomic, fiscal, and governance environment.

Last year, Fitch assigned Nepal a “BB-” rating, reflecting the country’s moderate credit risk profile, constrained by structural challenges such as limited export capacity, dependency on remittances, and fiscal pressures. However, the rating also acknowledged Nepal’s relatively low external debt levels and improving foreign exchange reserves as supportive factors.

Background and Significance

A sovereign credit rating serves as a crucial benchmark for international investors, development partners, and multilateral lenders. For Nepal, an improved rating could lower borrowing costs, enhance foreign direct investment (FDI) prospects, and build confidence in the country’s long-term economic stability.

Over the past year, Nepal has made policy strides in areas such as tax reform, digital financial governance, and capital market strengthening. The government also highlights its progress in hydropower exports to India, improving tourism inflows, and gradual recovery from global economic shocks as part of its narrative to secure a stronger rating.

Yet, challenges remain. Nepal continues to face sluggish industrial growth, widening trade deficits, and political transitions that have historically weakened investor confidence. Analysts note that Fitch’s upcoming assessment will weigh the country’s governance performance, debt sustainability, and ability to implement reforms effectively.