Scottish government aiming to issue first bonds in 2026-27

The Scottish government has been given the same credit rating as the UK as it prepares to issue its first financial bonds.

Credit rating company Moody's rated the Scottish government as Aa3 while rivals S&P Global rated it as AA, both identical to the UK's sovereign rating.

The government wants to issue bonds - which will allow it to borrow money from investors who in return receive regular interest payments - to raise money for infrastructure projects.

Moody's said its rating was based on the Scottish government's "prudent fiscal management" and the country's economic stability.

S&P said Scotland's economy was "strong" with the country operating "within a stable and predictable institutional framework that provides strong oversight and well-defined arrangements with the UK central government."

Both agencies cautioned that their ratings could potentially be cut if Scotland moves towards independence.

The Scottish government has had the power to issue bonds for a decade but has previously borrowed money from the UK National Loans Fund and until recently there were stricter limits on how much it could raise through bonds.

More recent analysis by the Scottish government suggests that bonds could offer better value for money under certain circumstances as well as greater flexibility.

First Minister John Swinney is expected to give an update on the government's plans later.

The credit rating assigned by agencies like Moody's or S&P influences investor confidence and helps determine the interest rate the government will have to pay on money it borrows.

Speaking on the BBC's Good Morning Scotland programme, Finance Secretary Shona Robison welcomed the news.

She said it pointed to the "strength and diversity" of Scotland's economy, as well as the country's "strong institutional framework and the prudent financial management of the Scottish government".

"This is about creating a gateway on the global stage to encourage investment here in Scotland and this will very much persuade investors that Scotland is a safe bet in order to invest here and that will be good for our economy," she added.

The Scottish bonds have been nicknamed "kilts" – a play on the word gilt, which refers to bonds issued by the UK government.

The Scottish government is allowed to borrow up to £472m for capital investment over the next year under an agreement reached with the UK government in 2023.

This would take its total capital borrowing to about £2.7bn - close to its legal limit of £3.1bn.

It is not just governments which can raise money through bonds.

Aberdeen City Council became the first local authority in Scotland to raise funds through the capital markets after issuing stock market bonds worth £370m in 2016.