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Scotland to Issue First Government Bonds in 2026-27
Scotland is set to launch its inaugural bond program in the 2026-27 financial year, First Minister John Swinney announced Thursday, marking a milestone in the devolved nation's fiscal autonomy. The move follows credit rating upgrades from two global agencies, which now rank Scotland on par with the UK government.
Credit Agencies Affirm Scotland's Fiscal Strength
Moody's assigned Scotland an Aa3 rating, while S&P Global rated it AA-identical to the UK's sovereign ratings. Both agencies cited Scotland's "prudent fiscal management" and "economic stability" as key factors. Moody's noted the nation's "strong oversight and well-defined arrangements with the UK central government," though it warned that a push for independence could trigger a downgrade due to "heightened uncertainty about the institutional framework."
S&P echoed the sentiment, describing Scotland's economy as "strong" but flagging independence as a potential risk. The ratings, Swinney said, reflect "a track record of responsible fiscal management and a pro-business environment."
Bonds to Fund Infrastructure, With 'Kilts' Nickname
The bonds-dubbed "kilts" in a nod to the UK's "gilts"-will finance capital projects like roads, schools, and green energy. Unlike past borrowing from the UK's National Loans Fund, bonds offer "greater flexibility and potentially better value," according to Scottish government analyses. The 2016 devolution of bond-issuing powers had gone unused until now, constrained by tighter limits.
Swinney emphasized the bonds would enable "borrowing better, not more," calling it "the latest step in building the institutions Scotland needs for a prosperous future." Details, including issuance timing and interest rates, will depend on market conditions, with banks soon to be engaged as joint lead managers to expedite the process post-election.
"Supplies have stabilized, but conservation remains essential."
John Swinney, First Minister of Scotland
Political Reactions Highlight Union Debate
Scottish Conservative finance spokesman Craig Hoy argued the ratings affirm the benefits of remaining in the UK, stating: "Scotland's good rating is a direct result of being part of the Union. The agencies make clear that independence would downgrade our creditworthiness." He accused Swinney's SNP of "obsessing over independence at the expense of economic stability."
The Scottish government currently holds £2.7bn in capital borrowing-near its £3.1bn legal limit-under a 2023 UK agreement. Aberdeen City Council pioneered local bond issuance in 2016, raising £370m for infrastructure.
What's Next
The bond program's launch hinges on the May 2026 Holyrood election results and final market assessments. Analysts suggest the bonds could lower borrowing costs while raising Scotland's profile among global investors.
