January 29: Fitch Ratings, an international rating company, has started Nepal's sovereign credit rating. DFID has pledged to bear all the expenses of the rating.

According to the Ministry of Finance, Fitch Ratings was entrusted in 2076. However, at that time the rating was stopped due to the onset of coronavirus.

The Government of Nepal has now urged DFID for financial assistance for the rating. As per the government’s request, the donor agency itself has asked Fitch Ratings to undertake the sovereign rating of Nepal.

According to the Ministry of Finance, the Government of Nepal will not spend any amount for the rating while the donor agency will bear all the expenses.

According to Dhaniram Sharma, joint secretary at the Ministry of Finance, Fitch Ratings is currently working on preparing the methodology for the rating. First of all, the rating company will look at the country's economic index and all other indices. For that, the company will request for data from the Ministry of Finance, Nepal Rastra Bank, National Planning Commission, and National Statistics Office.

"The data requested by the rating company will have to be provided when needed," he said, adding, "There will also be a paper workshop."

The financial division of the Ministry of Finance is preparing for the paper workshop. According to Sharma, the donor agency and the rating company have promised to complete the rating work within three months.

"The sooner Nepal furnishes the requested data, the quicker the rating results will be delivered," said Sharma.

The government had announced in the budget of the fiscal year (FY) 2075/76 to conduct the sovereign credit rating of the country. Even though this subject has been included in the budget since then, the rating work has not been done until now due to concerns that the rating results would not be as expected due to the impact of the coronavirus

Country rating is necessary to get information about investment environment, returns from investment etc. Although the Government of Nepal has been vigorously raising the issue of bringing in foreign investment, it has not been able to attract FDI due to the lack of sovereign credit rating.

So far, Nepal, Bhutan and Afghanistan are not rated among the South Asian countries. India has got triple B rating.

The reason why Nepal has not opted for a country rating until now is due to the fear of a bad report. However, experts have been saying that the government should not back down. At present, half a dozen banks, including one microfinance, have brought loans from abroad. Most of these loans came from the International Finance Corporation (IFC) under the World Bank Group. Apart from this, some loans have also been received from Switzerland, Germany, Dubai and Singapore.

Investors look at the credit rating of the country before investing. In order to increase investment, most countries conduct country rating from time to time. The work of rating which has not been carried out so far has been carried forward taking into consideration the upcoming investment summit. In the world, there are agencies such as Standard and Poor's (S&P) and Moody's, along with Fitch Ratings, which do credit rating of countries.