Sovereign credit

Sovereign credit is the credit of a sovereign country backed by the financial resources of that state. Sovereign credit is the opposite of sovereign debt. Fiat money is sovereign credit and sovereign bonds are sovereign debts. When money buys bonds, sovereign credit cancels sovereign debt.

Sovereign credit rating agencies

Currently, the global credit rating industry is overseen by three prominent agencies known as sovereign credit rating agencies: Moody's, Fitch, and Standard & Poor's. These agencies, similar to the major credit bureaus in the United States for consumers such as Equifax, Experian, and TransUnion, possess a rich and extensive historical background.

Sovereign credit rating agencies play a crucial role in assessing and evaluating the creditworthiness of sovereign nations and their ability to meet their financial obligations. By assigning credit ratings to countries, these agencies provide valuable information to investors, governments, and financial institutions, aiding in decision-making processes and risk assessment within the international financial markets.

Moody's, Fitch, and Standard & Poor's are internationally recognized institutions with a longstanding presence in the field of sovereign credit rating. They have established comprehensive methodologies and frameworks to systematically analyze various factors that impact a country's creditworthiness, including economic indicators, fiscal policies, political stability, and other relevant financial metrics.

These agencies' assessments, often referred to as credit ratings or sovereign credit ratings, are widely considered as essential benchmarks for investors and lenders worldwide. Their ratings can influence borrowing costs for governments, impact exchange rates, and even affect the overall economic climate of a country.

While these three agencies are the most prominent in the sovereign credit rating industry, there are other regional and specialized agencies that also provide credit ratings for specific countries or regions. However, Moody's, Fitch, and Standard & Poor's maintain a dominant position due to their extensive coverage, global recognition, and historical track record in evaluating sovereign credit.

Overall, the existence of sovereign credit rating agencies has significantly contributed to the transparency and efficiency of the international financial system, providing stakeholders with vital information to make informed decisions and manage risks associated with sovereign debt.

See also

• Sovereignty
• Debt
• Government debt

External links

• Liberating Sovereign Credit for Domestic Development