Nepal UK
Kathmandu - Nepal has retained its credit rating of ‘BB minus’ despite the country witnessing major shocks resulting from the Gen Z protests in Seotember this year followed by flood and landslides affecting different parts of the country.
Publishing a report on Nepal’s sovereign credit rating on Tuesday, the American credit rating agency Fitch Ratings Inc has evaluated the economic situation of Nepal with a promising rating of 'BB minus.'
Fitch Ratings has affirmed Nepal’s Long-Term Foreign Currency Issuer Default Rating (IDR) at BB- with a stable outlook, according to a statement published on its website.
The agency highlighted heightened political uncertainty following the youth-led unrest in early September 2025, followed by widespread arson and looting. It warned that delays in political transition and an increasingly fragmented party landscape could undermine effectiveness of policymaking and further weaken governance standards.
Fitch noted that Nepal’s sovereign credit strengths—supported by the successful implementation of the IMF program—have helped the country withstand recent social unrest that resulted in a change of government. However, it cautioned that lingering political uncertainty could raise risks to the economic and fiscal outlook and put pressure on Nepal’s credit profile over time.
Fitch said it expects the government to maintain solid access to multilateral and bilateral financing despite heightened political uncertainty, supported by its constructive engagement with the IMF. It added that domestic financing remains strong due to ample liquidity in the banking sector, driven by robust remittance inflows, lower policy rates and existing capital controls.
Nepal has foreign currency reserves adequate to finance external payments for over 16 months, which is above the BB peer median of 4.8 months. The reserves are expected to continue providing a substantial liquidity buffer against external vulnerabilities and to support the longstanding peg with the Indian rupee.
Amid ongoing global trade tensions, Nepal is likely to face limited direct impact from the adverse situation as the country has low reliance on merchandise exports. Fitch said that Nepal's medium-term growth prospects will be supported by continued investment in hydropower generation and transmission, more reliable electricity supply, and structural reforms to improve the business climate, boost productivity and create jobs.
Fitch has also underlined the weakening financial soundness indicators of banks along with the soaring non-performing loans, along with the significant insurance claims triggered by the recent unrest.
Nepal's 'BB-' rating reflects its low external debt burdens, strong external liquidity and solid medium-term growth prospects anchored by the hydropower sector, Fitch’s report said.
