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The Scottish government has received credit ratings from Moody’s and S&P Global that match those of the UK as it prepares to launch its initial bond issuance. Moody’s assigned Scotland an Aa3 rating, while S&P rated it AA, both reflecting the same sovereign rating attributed to the UK. This development enables the Scottish government to raise funds through the sale of bonds, a mechanism through which investors lend money and receive periodic interest payments, aimed at financing infrastructure projects.
Moody’s attributed its rating to the Scottish government’s cautious fiscal policies and the economic stability of the region. Similarly, S&P described Scotland’s economy as robust and noted that the country operates under a stable and predictable institutional framework. This includes strong oversight and clearly defined arrangements with the UK government. However, both agencies warned that these ratings might be downgraded if Scotland were to pursue independence in the future.
Although the Scottish government has had the authority to issue bonds for the past ten years, it traditionally borrowed from the UK National Loans Fund. Past restrictions on the amount it could raise through bonds were more stringent, but recent evaluations suggest that bonds may provide better financial value and increased flexibility under some circumstances. First Minister John Swinney is expected to provide further details on these plans soon.
The credit ratings assigned by firms such as Moody’s and S&P play a crucial role in shaping investor confidence and affect the interest rates the government must pay on borrowed funds. Finance Secretary Shona Robison expressed optimism about the ratings on BBC’s Good Morning Scotland program, highlighting that they reflect the “strength and diversity” of Scotland’s economy, as well as its “strong institutional framework and the prudent financial management of the Scottish government.” She emphasized that these ratings serve as a “gateway on the global stage” to attract investment by reassuring investors that Scotland is a reliable place to invest. The Scottish bonds have been informally dubbed “kilts,” a pun on “gilts,” which are bonds issued by the UK government. Under an agreement reached with the UK government in 2023, Scotland is permitted to borrow up to £472 million for capital investment over the next year, bringing its total capital borrowing close to £2.7 billion, just under its legal cap of £3.1 billion. It should be noted that other entities besides governments, such as local authorities, can also raise funds through bond issuance; for example, Aberdeen City Council became the first Scottish local authority to issue bonds in 2016, raising £370 million through the capital markets
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