“Provided the country receives credit rating, it will allow govt and private sectors issue bonds in the international market, while building confidence of foreign investors”
KATHMANDU, April 28: The government has initiated the process of Sovereign Credit Rating (SCR) for the country which was stalled for three years.
The SCR serves as a crucial indicator, offering insights into the country's financial situation and credit capacity. It is done to get real information about the country's investment risk situation.
The government move has come up just in the prelude of the Nepal Investment Summit-2024, which kicks off on Sunday. Foreign investors consider the sovereign credit rating as a prerequisite for investment.
Govt picks Fitch Ratings for Nepal’s sovereign credit rating
Provided the country receives the SCR, it would make it easier for the government as well as the private sector to issue bonds in the international market and raise large amounts of capital for trade or development projects. Due to a lack of credit rating, Nepal as of now has not been able to secure commercial loans for large infrastructural projects from international development partners.
As of now, Afghanistan, Bhutan and Nepal among the SAARC nations do not have sovereign credit ratings. With the aim of increasing foreign investment, the government announced the SCR through the budget of the fiscal year 2018/19. The government had issued a public notice and invited companies for sovereign credit rating.
Three prominent global rating agencies including Fitch Ratings, Moody's, and Standard & Poor's (S&P) Global Ratings submitted their applications for the credit rating of Nepal. Subsequently, the government reached an agreement with Fitch Rating Agency for the credit rating task. Additionally, a separate agreement for technical assistance was forged with the then British International Cooperation Agency, now UK Aid. To oversee the process, Standard Chartered Bank was appointed as the rating consultant.
However, the onset of the COVID-19 pandemic led to economic downturns, prompting the suspension of the rating process for the past three years.
The process of SCR has started again under the leadership of Finance Minister Barshaman Pun. Three years ago, during an international investment conference, foreign investors had emphasized the urgency of expediting the sovereign credit rating.
For that, the Ministry of Finance organized a SCR capacity development workshop with stakeholders in the capital on Friday.
The workshop was attended by Finance Minister Pun, Revenue Secretary Dr Ram Prasad Ghimire, Deputy Governor of the Nepal Rastra Bank Bam Bahadur Mishra, Head of the Financial Sector Management and Corporation Division of the Ministry of Finance Narayan Prasad Risal, Head of the Budget and Programme Division under the Ministry of Finance Ritesh Kumar Shakya, Director General of the Department of Money Laundering Pushpa Raj Shahi, representatives from the Central Bureau of Statistics, UK Aid, and Standard Chartered Bank.
During the inauguration of the workshop, Minister Pun said that the work of rating will proceed without delay. He said that after the credit rating, the world will be able to see the economic face of Nepal and no one should go around telling statistics about the economic situation.
During the workshop's inauguration, Minister Pun affirmed the government's commitment to expedite the rating process without any delay. He said that following the credit rating, the global community would gain insight into Nepal's economic landscape, eliminating the need for speculative discussions on the country's economic situation.
