In a significant move to attract more foreign investment, the Nepali government has revived the process of obtaining a Sovereign Credit Rating (SCR), which had been stalled for three years due to the COVID-19 pandemic’s economic impact. The SCR, issued by international credit rating agencies, is a crucial indicator of a country’s financial status and credit capacity, providing valuable insights into investment risks.
Without a credit rating, Nepal has faced challenges in securing commercial loans from international development partners, hampering its ability to access additional financing sources. Recognizing the importance of the SCR, the government had previously announced its implementation during the fiscal year 2075/76 and invited global rating agencies like Fitch, Moody’s, and Standard & Poor’s to submit applications.
Initially, the government had entered into an agreement with Fitch Ratings Agency and made immediate arrangements with the former British aid agency (DFID, now UK aid) to facilitate the rating process. Standard Chartered Bank was appointed as the rating advisor to oversee the proceedings.
However, the COVID-19 pandemic’s negative economic indicators and the potential negative messaging to the international community prompted the government to halt the credit rating process for the past three years. With the economy showing signs of recovery, Finance Minister Barshaman Pun has now revived the Sovereign Credit Rating efforts.
During an international investment conference three years ago, foreign investors had advised against delaying the SCR, highlighting its importance for attracting foreign investment. Heeding this advice, the government advanced the halted credit rating process during the third investment summit.
On Friday, the Ministry of Finance organized a Capacity Development Workshop on ‘Sovereign Credit Rating’ in the capital, underscoring the government’s commitment to obtaining an international credit rating.
The Sovereign Credit Rating is expected to provide accurate information about Nepal’s investment climate, financial status, credit capacity, and investment risks, thereby boosting confidence among foreign investors seeking opportunities in the Nepali market. By obtaining a credit rating, Nepal aims to enhance its ability to secure commercial loans from international development partners and foster an environment conducive to increased foreign investment.
