The Scottish government is gearing up to issue its first-ever bonds in the 2026-27 financial year, according to First Minister John Swinney. This milestone is contingent on the outcome of May’s Holyrood election and other influencing factors.
These bonds will allow Scotland to borrow directly from investors, offering regular interest payments in return, with the proceeds earmarked for major infrastructure projects.
Global credit rating agencies have given Scotland the same rating as the UK, signaling strong fiscal health. Moody’s rated Scotland at Aa3, citing prudent financial management and economic stability. S&P Global assigned an AA rating, noting the country’s robust economy and stable institutional framework. Both agencies warned that ratings could be affected if Scotland moves toward independence.
Swinney highlighted that the “high credit ratings” reflect Scotland’s responsible fiscal management and pro-business environment. He emphasized that the bond program is aimed at borrowing efficiently rather than excessively, marking a significant step in the maturity of Scotland’s public finances after more than 25 years of devolution.
Details of the bond issuance will depend on market conditions. The government plans to engage with banks soon to act as joint lead managers, ensuring a smooth rollout for the next Scottish administration.
What are government bonds?
Government bonds are essentially loans from investors that the government promises to repay over a fixed period, with regular interest payments. In the UK, these are called gilts, and Scotland’s bonds have been nicknamed “kilts.”
Since gaining the power to issue bonds in 2016, Scotland has primarily borrowed via the UK National Loans Fund. However, recent reforms and analyses suggest that issuing its own bonds could provide better value, more flexibility, and help raise Scotland’s international profile as an investment destination.
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