July 8: Fitch Ratings, which has been assigned for sovereign credit rating of Nepal, has prepared an action plan for conducting credit rating within six months of the next fiscal year. The Ratings Oversight Committee, formed under the coordination of revenue secretary of Ministry of Finance (MoF) had given the task of Nepal’s credit rating to the US-based company three months ago after conducting discussions and studies.
According to MoF Spokesperson Uttar Kumar Chhetri, Fitch Ratings, which is considered as one of the finest international agencies in sovereign rating, was given the responsibility of Nepal’s credit rating in Mid-December 2019.
Moody’s, Fitch and Standard and Poor’s are the three major global credit rating agencies. “Among them, we selected Fitch for the purpose of conducing Nepal’s ratings. Before selecting the company, we held discussion with the officials and representatives of government agencies concerned,” said Chintamani Shiwakoti, deputy governor of Nepal Rastra Bank, who is also a member of the committee.
However, Fitch has complained about the delay in collection of data required for ratings due to the Covid-19 pandemic. In his budget speech for FY2020/21, Finance Minister Dr Yuva Raj Khatiwada had said that the credit rating of Nepal would be completed within the next six months.
Stakeholders have been urging for sovereign rating saying that the absence of the rating has hugely impacted foreign direct investment (FDI) prospects of Nepal. Nevertheless, about half a dozen banks and financial institutions have borrowed billions of rupees in loans from foreign financial institutions over the last few years. After NRB opened the way for Nepali banks to get loans from foreign financial institutions, NMB Bank has borrowed highest foreign loans. “Foreign financial institutions have trusted us even when the country does not have a credit rating. Once the rating is done, the confidence of the foreign institutions will increase,” mentioned Sunil KC, CEO of NMB bank.
Statistics related to economic activities in the country, ability to repay loans, trade with other countries and other various aspects are assessed while conducting sovereign rating. According to officials at Credit Rating Oversight Committee, the rating will form a basis for easy access to funds in the international market and sales of bonds.
Experts say that the sovereign rating helps to depict the real economic and financial situation of Nepal internationally. Bhishma Raj Dhungana, Chairman of Securities Board of Nepal says that the rating will determine the level of risks in the country. “Foreigners decide whether or not to invest here based on the ratings. The better the rating, the more could be the investments,” he said.