Nepal has started the second year of sovereign credit rating process. Nepal, which got the 'BB minus' rating for the first time on 7th November 2081, has started the second year evaluation process. Fitch, an international agency known worldwide for sovereign credit rating, had 'rated' Nepal.

This company was already selected by the Government of Nepal for evaluation for two years and technical support for the third year. At that time, Nepal's 'rating' was better than other South Asian countries except India. Nepal's 'rating' is two places below that of India. Currently India's 'rating' is 'BBB minus'. 

Under the same process, Fitch has already started the second year evaluation, and a team of "Fitch" is coming to Nepal on this 23 Vad (8 September 2025) for the on-site evaluation. The team is scheduled to conduct on-site evaluation on 24, 25 and 26 August. During that period, the team will also discuss with high government officials, government agencies and the private sector and their organizations. 

Now Nepal has to 'rating' every year. At the same time, the second year 'rating' has started. For the third year of 'rating', the government should again select a 'rating' company from the competition. In the current assessment, Fitch looks at what has changed over the past year. It will also investigate how the commitments made earlier have been fulfilled, what new good/bad things have been done. 

Fitch evaluates in two ways: quantitative (factual) and qualitative (thematic). Under Quantitative there are 18 indicators under four headings. These include indicators of good governance, GDP per capita, Nepal's share in world GDP, restructuring and weakness during the year, gross money supply, real economic growth rate, fluctuations in economic growth rate, consumer inflation, public debt to GDP ratio, public debt interest and revenue, government finance balance status, foreign exchange reserves/GDP ratio, fluctuations in foreign exchange reserves, ratio of net foreign assets to GDP, among others. 

Ministry of Finance sources said that most of the mentioned one and a half dozen indicators had positive changes and limited indicators remained stable. From evaluating those indicators, Fitch derives a score. Can plus/minus 3 points in the said result. 

In the next thematic assessment, what are the plans and policies for the future? What is the status of policy implementation? Political stability and capacity, financial sector risk, other structural elements, sustainability of public debt, financial structure, medium past commitments fulfilled/not fulfilled? It looks at whether or not macroeconomic stability has been maintained. In this way, the 'rating' of Nepal is derived based on the data obtained from the evaluation of both sides.

After Fitch's team will come to Nepal for on-site assessment, a meeting of high officials was held at the Ministry of Finance on Monday regarding their preparations. In which it has been decided to properly prepare for this year's sovereign credit 'rating' and systematically present the achievements of Nepal. In the meeting, Deputy Prime Minister and Finance Minister Bishnu Prasad Paudel claimed that Nepal has made significant progress in one year and instructed to present systematic details to the rating team. 

"In the meeting, there was a discussion about prioritizing the reforms in the areas of economy, policy and legal sector and good governance as well as political stability, roads, tourism, hydroelectricity, etc.," the Ministry of Finance source said. National Planning Commission Vice Chairman Shivraj Adhikari, Member Prakash Kumar Shrestha, Nepal Rastra Bank Governor Vishwanath Poudel, Finance Secretary Ghanshyam Upadhyay, Revenue Secretary Dinesh Kumar Ghimire and others were present in the meeting. 

In the first year, Fitch provided the 'rating' based on the assumption that there will be a positive increase in the economic growth rate as there are strong foreign exchange reserves in Nepal and signs of economic activity. The 'rating' also showed that there is a lot of potential for economic reform if there is political stability in Nepal. But in the last one year, the external indicators of the economy have been consistently strong along with the foreign exchange reserves, but the economic growth has not been able to meet the target. 

Similarly, Fitch showed that even though Nepal's financial sector is strong, there are problems in government finances. Fitch pointed out weaknesses such as revenue and capital expenditure not increasing, public debt increasing, effectiveness of regulatory agencies, and some legal aspects still to be improved. However, these subjects are still weak. 

Fitch also pointed out the unstable trend of continuous government change in Nepal. Since 2014, the government has changed in Nepal for eight years. The central bank's performance has also been affected by political changes,' said Fitch's report, 'despite political instability, it has been seen to be sensitive to economic and financial management.' A 'rating' below that is considered high risk or likely to default. Experts say that the worse the 'rating' is, the greater the risk that the country will not be able to repay the loan or the investment environment is considered bad.  Analysts say that after the

'rating', it will be easier for the government to issue bonds to bring in investments from abroad and take loans. Also, they say that since the 'rating' shows a lot of potential for improvement, if necessary improvements can be made, it has also opened the way to get a higher level 'rating'. Before investing in another country, foreign investors look at its 'rating'. Similarly, credit 'rating' is mandatory for a country to raise debt by issuing bonds in the international market. 

In the sovereign 'rating', all aspects of the country, including economic, political, environmental, and legal, are evaluated. When evaluating in this way, the world's biggest "rating" companies S&P, Fitch and Moody's "rate" from the best "AAA" (triple A) to the worst C grade. The same 'rating' indicates the investment situation of the respective country.

With the aim of increasing foreign investment, the government announced sovereign credit 'rating' through the budget of the financial year 2075/76. Accordingly, the government issued a notification and invited the companies for sovereign credit rating. Fitch, Moody's and Standard & Poor's, the world's three major rating companies, also applied. Out of which the government had entered into an agreement with Fitch Rating Agency regarding credit rating. For that, a separate technical assistance agreement was also made with the then UK International Cooperation Agency (DFID) and the current UK Aid.