KATHMANDU: The government had announced its plans to complete Nepal's credit rating before the investment summit held in late April. However, two months after the summit, no significant progress has been made in this regard. The government aims to undertake Nepal's credit rating through the American credit rating company Fitch Ratings, with a grant from the British government.

A sovereign credit rating is a key indicator of a country's financial health and creditworthiness. It shows how secure a country's government-issued international bonds are, which helps attract international investors and depicts the investment environment. Good foreign investors often consider a sovereign credit rating a prerequisite for investment. However, Nepal has not yet obtained a country credit rating.

Six months ago, a task force led by the Joint Secretary of the Financial Division of the Ministry of Finance was given the responsibility to complete the necessary preparations for the country rating before the investment summit. Although the task force completed the necessary preparations, the rating company has not yet conducted a field visit.

As the rating company did not visit by the third week of May, the task did not get priority due to the need to prepare the budget. A high-ranking official from the Ministry of Finance stated, "The company has said that they will visit in September."

According to the official, the Ministry of Finance is now working to update the indicators prepared in April. "We have collected the data according to the format requested by the rating company. It won’t be a problem for us to update it," said the official.

However, since there has been no progress even after the investment summit, finance ministry officials cannot yet confirm when the credit rating process will conclude. "We have been trying for a long time, but the work has not been done," said the official. "However, there is a possibility that the rating work will be completed before Dashain."

Finance ministry officials indicated that the rating work was delayed due to a lack of clarity on the scope of work between the British Cooperation Agency (Foreign, Commonwealth and Development Office), which provided the grant for this work, and Standard Chartered Bank, which provided technical support.

Once the credit rating is obtained, Nepal will be able to raise resources from the international market by issuing bonds. Nepal has not yet mobilized resources through international bonds. However, the Asian Development Bank and the International Finance Corporation have initiated issuing international bonds in Nepalese currency.

Due to limited domestic resources, there is a need to mobilize foreign resources for the country's infrastructure sector. The country's revenue is only sufficient to cover current expenses, making Nepal highly dependent on internal loans and foreign aid for development expenses.

The government first announced plans for a country rating in the budget of the fiscal year 2076/77. This has also been mentioned in the current year's budget. Due to the lack of a rating, banks have been unable to secure large loans directly, and Nepal has faced challenges in obtaining commercial loans for large infrastructure projects from international development partners.

The government issued a public notice to companies for the sovereign credit rating. Fitch, Moody's, and Standard & Poor's, the world's three major rating companies, applied. Among them, the government entered into an agreement with Fitch Ratings for the credit rating. Standard Chartered Bank has been appointed as a rating consultant for this process.

Previously, due to the COVID-19 pandemic, all economic indicators were negative, and the government halted the process to avoid sending a negative message to the international community. Despite assurances from former Finance Minister Dr. Prakash Sharan Mahat and current Finance Minister Barsha Man Pun that the sovereign credit rating would be completed before the investment summit, government officials claim the delay is due to Fitch Ratings not yet starting the work.

Additionally, the government has announced that the rating work could be included in next year's budget as well. The repeated inclusion in the budget without implementation has raised questions about the government's credibility.

Former Vice Chairman of the National Planning Commission Dr. Pushparaj Kandel commented, "It is unfortunate that the work to be done before the investment summit has not been completed yet. There should be no delay in this." He emphasized that the government should immediately direct Fitch Ratings to complete the work.