Nepal has finally launched the process for acquiring the country’s Sovereign Credit Rating (SCR) which was put on hold for the past few years due to various reasons.
At present, a two-member team from Fitch Ratings Agency (FRA), one of the top three credit rating organizations in the United States, that has been assigned for the credit rating process, has started consultation with officials of various government offices. The team has expressed its concern over the government policies and actions on revenue mobilization, capital expenditure and mobilization of the foreign aid.
Mahesh Bhattarai, spokesperson for the Ministry of Finance (MoF), said the team has studied the trend of the country’s macroeconomic system of the past five to ten years. According to him, the team aims to complete its task in the next two months, while it will issue a preliminary report on Nepal’s SCR in the next three weeks.
Provided the country receives credit rating, it will allow the government and the private sector to issue bonds in the international market that could help generate necessary financial resources for the government. Likewise, it might help increase inflow of foreign capital by building confidence of foreign investors towards the country.
As of now, Afghanistan, Bhutan and Nepal among the SAARC nations do not have sovereign credit ratings. With an aim of increasing foreign investment, the government announced the SCR through the budget of the fiscal year 2018/19. Subsequently, the government reached an agreement with the FRA 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 four years.
Meanwhile, the FRA is reported to have expressed its high concern for the conventional type of fiscal policy being implemented by Nepal. According to the FRA representatives, Nepal has been facing slow economic progress mainly due to the government failing to take risks showing the pretext of ongoing problems in the international arena. “They have raised their concerns on lack of innovation in monetary and fiscal policies and the government’s failure to take risks on adopting dynamic measures at the policy level,” said an official of the MoF.
