#Sovereign Credit Rating: What It Is and How It Works
Sovereign credit rating is a rating given to a country’s ability to repay its debt
It shows how safe it is to lend money to that country
#Who Gives Sovereign Credit Rating
Moody’s
S&P (Standard & Poor’s)
Fitch
#These are global rating agencies that evaluate countries
What Parameters They Check
Economic Strength
GDP size
Growth rate
Income level
#Debt Level
Total government debt
Debt to GDP ratio
Fiscal Position
Government deficit
Revenue vs expenditure
Inflation and Stability
Inflation level
Currency stability
Political Stability
Government stability
Policy consistency
External Position
Foreign reserves
Current account balance
External debt
#Banking System
Strength of banks
Financial system stability
#Why It Is Important
High rating
Low borrowing cost
More foreign investment
Stronger currency
#Low rating
High interest cost
Less investment
Economic pressure
#Sovereign credit rating is the trust score of a country in global finance
The stronger the fundamentals
The higher the rating
The higher the rating
The stronger the economy