Perceptions are often stronger than reality. In the current situation, where economic experts have made very negative assumptions about Nepal's economy, the assessment of Nepal by an international credit rating agency has sent a strong message that the country’s economy is heading in the right direction. The rating by Fitch Group has given some relief to those who argue that Nepal's economy is on the brink of collapse. This long-awaited sovereign rating has given Nepal an inaugural rating of BB-, a historic milestone in its journey toward economic prosperity. Although this rating will not bring any immediate change to the current situation, it can help boost the confidence of prospective investors from both at home and abroad and improve the current state of the economy. The independent and reliable 'rating,' done after an overall assessment of Nepal's economic situation, has helped to dispel the rumor that the economy is not in good shape. This rating sends a powerful message to global investors, solidifying Nepal’s position as a promising and attractive investment destination.
There are mainly three rating agencies in the world, namely Moody's Investors Service, Standard & Poor's, and Fitch Group. They play a crucial role in assessing the creditworthiness of various entities, including governments, corporations, and financial institutions. They classify the creditworthiness of any country or corporate entity into different categories such as credit A, B, C, or D. Fitch Group has rated Nepal's credit as 'BB-minus.' This rating provides investors around the world with the first information on the level of the country's macroeconomic situation and whether or not it is safe to invest in Nepal. The rating received by Nepal can be considered positive. While there is a risk that the rating will go down if the economy does not improve or if there is political unrest, the current rating sends a message that the economic situation in Nepal is conducive to investment. In particular, this rating is helpful in cases where the Nepalese government has to issue bonds in the foreign debt market or attract foreign investment. The rating conveys information about how positive the Nepalese government is regarding repaying its debt or its ability to do so.
Govt picks Fitch Ratings for Nepal’s sovereign credit rating
Fitch's report on Nepal's economy highlights both strengths and weaknesses. While the low debt level is a positive indicator, the weak structural factors pose challenges. Nepal's foreign exchange reserves are good, and the growth of the hydropower sector is positive. Although the GDP is below the midpoint of the BB level, it has improved after the political changes in 2006. This conveys information about Nepal's positive economic situation, which Nepal should be able to promote in the international market. Fitch also notes that Nepal's government debt is only 44 percent of GDP, which is lower than the midpoint of other BB-level countries, which is 55 percent. Fitch does not expect this debt percentage to increase further. This rating is given because Nepal's provinces have no external debt, and the government also provides loans to government institutions. Fitch Group, while calculating Nepal's rating, has made very in-depth study on many other points and also predicted the direction Nepal may take in the future. It is high time that government agencies and private sector organizations used this rating to convey the message to the prospective investors that Nepal's economic future is bright.
