A sovereign credit rating grades the risk of lending to a government. Agencies weigh debt levels, growth, institutions, FX reserves, and political factors, then assign a letter scale that investors use as a quick risk shorthand.
Key takeaways
- Ratings are opinions, not guarantees, and they can lag real crises or recoveries.
- Downgrades often raise borrowing costs and can force some funds to sell bonds.
- Local-currency and foreign-currency ratings for the same government can differ.
- Methodology documents explain drivers, but judgment still enters every decision.