Fitch Ratings: Clear-majority govt could end political instability
According to Fitch, the electoral outcome in favor of RSP presents a potential opportunity for policy stability, good governance, and the implementation of economic reforms.
KATHMANDU: International credit rating agency Fitch Ratings has indicated that the clear majority secured by the Rastriya Swatantra Party (RSP) in Nepal could help reduce the country’s political instability.
According to Fitch, the electoral outcome in favor of RSP presents a potential opportunity for policy stability, good governance, and the implementation of economic reforms.
In recent years, the absence of a decisive mandate for any single party has contributed to political volatility and weakened investor confidence.
Fitch noted that RSP’s win reduces the risk of repeated artificial coalitions for forming governments. The end of frequent government changes could further boost investor sentiment. The agency’s press statement emphasized: “The election result appears to break away from the politics of traditional power-sharing. Established parties such as Nepali Congress and CPN-UML lost many seats, reducing the likelihood of such arrangements.”
At the same time, Fitch highlighted that some of RSP’s economic targets are ambitious and challenging to achieve. The party’s manifesto aims for an average annual GDP growth of 7% and a per capita income of USD 3,000 over the next five years—targets Fitch described as “ambitious.”
Fitch projects Nepal’s GDP growth to be around 4.5% by July 15, 2027, indicating that achieving these goals will be difficult under current conditions. The agency noted that the success of RSP’s policy agenda will heavily depend on the government’s ability to implement reforms effectively.
In Nov 2025, Fitch had assigned Nepal a BB- credit rating, citing low external debt, favorable borrowing conditions, strong external liquidity, medium-term growth potential from hydropower, and successful IMF program implementation. However, per capita income and governance indicators remain weaker compared to other BB-rated countries.
Fitch identified “implementation capacity” as the main risk for the new government. Weak government effectiveness and regulatory quality could hinder reforms. The agency stressed that tangible improvements in the business environment, accountability, and anti-corruption measures will be crucial for attracting domestic and foreign investment.
