Nepal has successfully maintained its sovereign credit rating of ‘BB minus’, even as the country faced significant disruptions caused by the Gen Z movement and widespread flood- and landslide-related damages.
The US-based credit rating agency Fitch Ratings Inc. released its latest assessment on Tuesday, reaffirming Nepal’s Long-Term Foreign Currency Issuer Default Rating (IDR) at BB- with a stable outlook.
Fitch highlighted the rising political uncertainty following the youth-led unrest in early September 2025, which erupted after the government imposed a social media ban. The agency warned that delays in political transition and an increasingly fragmented political environment could weaken policy effectiveness and further erode governance standards.
Despite the unrest, Fitch noted that Nepal’s sovereign credit strengths—bolstered by the successful implementation of the IMF program—have helped the country withstand the recent instability that resulted in a change of government. However, it cautioned that persistent political uncertainty could heighten risks to the economic and fiscal outlook over time, potentially putting pressure on the nation’s credit profile.
Fitch said it expects Nepal to continue having strong access to multilateral and bilateral financing, supported by positive engagement with the IMF. It also observed that domestic financing remains robust due to high liquidity in the banking sector, driven by strong remittance inflows, reduced policy rates, and existing capital controls.
Nepal’s foreign exchange reserves are currently sufficient to cover more than 16 months of imports—far above the BB-rated peer median of 4.8 months. These reserves are expected to remain a critical liquidity buffer, helping safeguard the long-standing currency peg with the Indian rupee.
Although global trade tensions persist, Fitch believes Nepal will face limited direct impact due to its low dependence on merchandise exports. The agency added that the country’s medium-term growth prospects will be supported by ongoing investments in hydropower generation and transmission, improved electricity supply, and structural reforms aimed at enhancing the business environment, productivity, and job creation.
However, Fitch also pointed to weakening financial soundness indicators in Nepal’s banking sector, rising non-performing loans (NPLs), and large insurance claims linked to the recent unrest.
Fitch’s report stated that Nepal’s BB- rating reflects its low external debt, strong external liquidity, and solid medium-term growth outlook anchored in the hydropower sector.
Commenting on the rating, former banker Sashin Joshi noted that maintaining a BB- rating with a stable outlook is a positive outcome for Nepal. However, he cautioned that reaching investment-grade status would require long-term socio-political stability and sustained improvements in the business climate, supported by progressive regulatory and bureaucratic reforms.
