Fitch says RSP Majority Offers Chance for Economic Reforms

International credit rating agency Fitch Ratings has said that the clear majority secured by the Rastriya Swatantra Party (RSP) in the March 5 elections could bring short-term political stability in Nepal and create an opportunity to advance economic reforms.

In an assessment released after the election, Fitch said the RSP’s single-party majority reduces the risk of near-term political instability and could create space for more predictable policymaking and reform efforts.

According to Fitch, voters handing a majority mandate to a single party after years of political fragmentation and power struggles could help push forward reforms that have often stalled due to unstable coalition governments.

In the recent election, the RSP won 125 out of 165 seats under the first-past-the-post system in the House of Representatives. The party has also emerged dominant in the proportional representation vote.

According to the Election Commission, the RSP is expected to command close to a two-thirds majority in the House after combining the direct and proportional seats.

Fitch said the party’s clear majority could reduce the likelihood of frequent government changes that have characterised Nepal’s politics in recent years.

Before the election, the RSP had pledged in its manifesto to form a stable, governance-focused government if it secured a majority. The party also vowed to digitise government services and improve administrative efficiency.

Fitch said the strong electoral mandate could make it easier for the new government to implement governance reforms and economic policy changes.

The RSP has set an ambitious goal of transforming Nepal into a respectable middle-income country within the next five to ten years. Its manifesto aims to maintain at least 7 percent annual economic growth in real terms, build a strong economic foundation within five years and raise per capita income to at least $3,000.

However, Fitch described these targets as ambitious.

“Nepal’s economic growth is projected at around 4.5 percent in the current fiscal year. The actual growth trajectory will depend on policies adopted by the new government to boost productivity, create jobs and encourage private sector investment,” Fitch said.

According to the party’s manifesto, the government plans to raise productivity, create domestic jobs to reduce dependence on foreign employment, and attract private investment in infrastructure, agriculture, digital technology and innovation.

In November 2025, Fitch assigned Nepal a ‘BB-’ sovereign credit rating.

The agency said Nepal’s credit profile could improve if governance strengthens and the country creates a more favourable environment for private and foreign investment.

However, Fitch cautioned that implementation capacity remains a key challenge. It noted that Nepal’s government effectiveness and regulatory quality remain weaker than those of many peer countries, raising the risk that reforms may not progress as planned.

Investors are likely to closely watch the new government’s anti-corruption drive and concrete improvements in the business environment, Fitch said.

Nepal’s ‘BB-’ rating is supported by relatively low reliance on concessional borrowing, strong external liquidity and medium-term growth prospects driven by the hydropower sector. Successful implementation of the IMF programme has also helped strengthen economic resilience.

However, structural challenges such as vulnerability to external shocks, natural disasters and low per capita income remain significant risks to the economy.