Nepal secures BB- credit rating

Kathmandu, Nov. 22

Nepal has successfully secured a BB- score in its first-ever sovereign credit rating.

It is a significant milestone highlighting the nation's economic structure, fiscal management, and macroeconomic stability, according to the Ministry of Finance (MoF).

The Ministry said in a statement on Friday that this achievement underscores Nepal's creditworthiness, robust financial and economic capacity, and its ability to secure international loans at lower interest rates. The rating is also expected to enhance private sector confidence and attract foreign investments.

Sovereign credit ratings assess a country’s economic health across four key dimensions: structural features, macroeconomic performance, public finance, and external finance.

"Ratings are determined using a combination of sovereign rating models and qualitative analysis, with scores ranging from a minimum of 'D' (default risk) to a maximum of 'AAA' (high credit quality)," said the MoF. Nepal's rating process, conducted by Fitch Ratings Ltd., involved a comprehensive evaluation of the country's economic structure, public finance, debt sustainability, and medium- to long-term growth plans, as outlined in Nepal's 16th Five-Year Plan which went into implementation from the current Fiscal Year 2024/25.

During their on-site visit from September 11–13, 2024, Fitch’s expert team held consultations with senior officials from the Office of the Prime Minister, the MoF, the National Planning Commission, and the Nepal Rastra Bank. The team also interacted with the leaders from the private sector, bilateral and multilateral development partners, and reviewed key infrastructure projects which also included an inspection of the Nagdhunga Tunnel as a case study for Nepal’s long-term development strategies.

The MoF maintained in the statement that sovereign credit ratings are a critical tool for global investors and financial institutions to assess the investment environment of a country. "For Nepal, the BB-rating reflects not only the current state of its economy but also its capacity to meet future debt obligations on time. This transparent evaluation showcases Nepal’s economic landscape to the international community, fostering trust and credibility," it said.

The MoF also stated that when compared to other South Asian nations, Nepal’s BB- rating is considered satisfactory, generating optimism among the government, private sector, and investors. As Nepal prepares to graduate from its Least Developed Country (LDC) status by 2026, this credit rating serves as a preparatory step towards exploring innovative and alternative financing options.

This rating bolsters Nepal’s standing as an investment-friendly destination, the MoF further said. It is expected to boost foreign investor confidence, leading to increased investments in critical sectors such as infrastructure, tourism, agriculture, and services. "This momentum could drive transformative growth in the coming years, positioning Nepal as a competitive player in the global economy," read the MoF Statement.

Published in The Rising Nepal daily on 23 November 2024.