Saturday, February 7, 2015

What is Sovereign Credit Rating?



The credit rating of a country, given by a rating agency, is called the sovereign credit rating or more simply sovereign rating. Such ratings aim to help investors gauge the level of risk that they will take if they invest in a particular country. These ratings usually take into consideration economic as well political risks for each country. `AAA' (pronounced triple A) is the highest rating that a country can get. Getting a high sovereign rating usually makes it easier for the country to borrow in the international markets. A high rating also helps the country to attract more foreign investment since a large number of investors require their investments to go only to countries rated at a certain minimum level. However, lately sovereign ratings have come under severe scrutiny. Often a country which gets a rating below its expectation, also criticizes ratings agencies.

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