First Minister John Swinney has declared the announcement of plans for Scottish government bonds a "very proud day for Scotland." The SNP leader confirmed that the bonds, designed to attract investment for crucial infrastructure projects, are scheduled for issuance in the 2026-27 financial year.
A Vote of Confidence from Global Markets
The landmark decision follows a significant endorsement from two leading global credit rating agencies. Both Moody's and S&P Global have awarded Scotland credit ratings that are identical to the United Kingdom's sovereign rating.
Moody's assigned a rating of Aa3, while S&P Global provided an AA rating. These assessments place Scotland's creditworthiness higher than major economies such as Spain, Italy, and Japan.
Mr Swinney stated that this achievement reflects "the economic strength of Scotland, the strength of our financial management, and the strength of the financial institutions within Scotland." He emphasised that this solid foundation enables the government to plan for the issuance of a bond up to a value of £1.5 billion over the course of the next parliamentary term.
Funding Scotland's Future
The proposed bond issuance, which would allow investors to buy Scottish government debt, is intended to provide a new mechanism for financing the nation's capital programme. While the First Minister indicated that priority areas like housing and the transition to net zero could benefit, he declined to specify other exact programmes that would be financed at this stage.
The government has committed to providing more detail in January, when it will publish its investment programme outlining the specific projects to be advanced in the coming years. "What the announcement overnight from the credit rating agencies demonstrates is that Scotland has every potential to attract investment on international financial markets," Mr Swinney added.
Conditions and Cautions
The ambitious plan is not without its conditions and caveats. The bond issuance is subject to the outcome of the Scottish parliament election in May and will also depend on market conditions closer to the proposed launch date.
Furthermore, the report from Moody's highlighted a potential risk, noting that Scottish independence could lead to a downgrade. The agency cited the "heightened uncertainty about the institutional framework and potentially raised financial stability risks" that independence could introduce, though it clarified this was not its baseline scenario.
In preparation, the Scottish government will shortly begin engagement with banks to act as joint lead managers. This preparatory work, nicknaming the proposed bonds "kilts" in a play on the UK's "gilts," aims to ensure the next government can proceed without delay. This initiative continues work commissioned by former First Minister Humza Yousaf in 2023, following recommendations from the government's own investor panel to use bonds to raise Scotland's international profile.
The business community has responded positively. Angus Macpherson, Chairman of Noble & Co and former co-chair of the investor panel, said he was "greatly encouraged" by the progress, calling it a "positive step forward" that demonstrates the government is serious about becoming a more investor-friendly destination.
