Scotland to launch government ‘kilt’ bonds

“The Scottish Government’s high credit ratings are testament to Scotland’s history of strong institutions, responsible financial management and a pro-business environment,” Scottish First Minister John Swinney said in a statement on Thursday. he said.

He argued that the issuance of Scottish government bonds, popularly known as kilts, was a step towards “a prosperous future where our country takes responsibility for its own decisions”.

Swinney added on Thursday: “Whilst specific issuance plans will be subject to market conditions closer to that time, we will shortly begin discussions with banks to act as joint lead managers to ensure the next Scottish Government moves forward without delay.”

The Scottish government was given the power to issue its own bonds almost a decade ago, but until now it has been borrowing using the UK National Credit Fund.

In 2023 the Scottish Government Investor Panel recommended floating government bonds on the public market as a way to raise the country’s profile and attract inward investment.

Angus Macpherson, chairman of financial consultancy Noble and Co and former co-chair of the Investor Panel, said Scotland’s credit rating would help the country make progress towards these targets.

“This is a positive step forward and shows that they are serious about becoming a more investor-friendly destination,” he said in a statement on Thursday.

Accounting giant EY is advising the Scottish government on its bond issue.

Both Moody’s and S&P Global this week emphasized that the credit rating given to Scotland was given to the country as a devolved country of the United Kingdom.

“We may downgrade Scotland if it takes concrete steps towards independence from the UK,” S&P Global said in a statement on Wednesday. he said. “Our rating on Scotland reflects our view of the UK’s supportive and clearly defined institutional framework for devolved territories (nations), as well as Scotland’s prudent fiscal policies.”

The agency noted that Scotland will continue to receive a large grant from the UK to cover much of its spending, including infrastructure investment.

“Limited borrowing requirements and gradually maturing liabilities will result in very low total debt of just 10% of operating income by 2027,” S&P Global added.

Meanwhile, Moody’s said that downgrading England’s credit rating would likely have similar consequences for Scotland.

Explaining the logic behind the rating it gave to Scotland, the organization said, “Difficulties in balancing the budget due to rapidly increasing spending pressures or large reductions in block grants will also put downward pressure on the rating.” he said.