Kathmandu, Apr. 28: The government has started the process of sovereign credit rating of the country which had been stopped for three years. The sovereign credit rating is a measurement of a government’s ability to repay its debts and show the picture of the country’s financial situation.

Similarly, sovereign credit rating is done to get real information about the country’s investment risk situation. Foreign investors have taken sovereign credit rating as a prerequisite for investment. Due to lack of credit rating, Nepal has not been able to take commercial loans for large infrastructures from international development partners.

With the aim of increasing foreign investment, the government announced the sovereign credit rating through the budget of the fiscal year 2018/19. The government had issued a public notice and invited companies for sovereign credit rating. The world’s three major rating companies, Fitch, Moody’s and S&P Global, applied. 

Out of these, the government made an agreement with Fitch Rating Agency regarding credit rating. For that, a separate agreement regarding technical assistance had also been made with the then British International Cooperation Agency (DFID) and the current UK Aid. For that process, the government has appointed Standard Chartered Bank as a rating consultant. 

Due to the COVID-19 pandemic, all the indicators of the economy were negative and the credit rating sends a negative message to the international community, this process was stopped for the last three years. 

The process of sovereign credit rating has started again with the initiative of Finance Minister Barsaman Pun. Three years ago, during the international investment conference, foreign investors suggested not to delay the sovereign credit rating.

On the eve of the third Nepal Investment Summit, the government has resumed the stalled credit rating process. For that, the Ministry of Finance organised a ‘Sovereign Credit Rating’ capacity development workshop with stakeholders in the capital on Friday.

In the workshop Finance Minister Pun, Revenue Secretary Dr. Ram Prasad Ghimire, Deputy Governor of the Nepal Rastra Bank Bam Bahadur Mishra, Head of the Financial Sector Management and Cooperation Coordination Division of the Ministry of Finance Narayan Prasad Risal, Head of the Budget and Programme Division of the Ministry of Finance Ritesh Kumar Shakya, Director General of the Department of Money Laundering Investigation Pushparaj Shahi,  representatives from UK Aid, and representatives of rating advisor Standard Chartered Bank participated.

Speaking at the opening session of the workshop, Minister Pun said that the credit rating work would be carried out without delay. He said that after the credit rating, the world would be able to see the economic face of Nepal and no one should go around giving statistics about the economic situation.

He emphasized that Nepal must attract foreign investment as it is not possible to develop according to the country’s needs and aspirations of the people only by mobilising internal resources. He said that for that, sovereign rating is necessary for investors to know about the financial health of the country. 

“We have taken the goal of Vision-2100 B.S. to upgrade Nepal to a developed economy by 2100,” Minister Pun said. “For that, at least a continuous economic growth of 7.5 per cent is necessary. Investment is needed for economic growth. The goal of development cannot be achieved only through public and private investment. Foreign investment should be increased on a large scale.”

“With foreign investment, the size of the economy also increases. Since internal investment will also increase along with external investment, it is necessary to move to sovereign rating as soon as possible. After sovereign credit rating, investors can easily get information about the economic, business and political system and the investment environment, so the credibility of the country will also improve,” said Minister Pun. 

Pun clarified that the world should be able to understand that the investment environment in Nepal is good, there are many areas of investment and there is a guarantee of profit. Pun said that if there was an unfavourable environment for investment as stated outside, why would investors come and those who are currently investing would expand the investment portfolio. 

Secretary of the Ministry of Finance Dr. Ghimire said that the stalled process of sovereign credit rating has moved forward. After the rating, the world will come to know about the economic situation of Nepal as well as the economic transparency and good governance, he said.