Scotland Prepares to Launch 'Kilts' Bonds Amid High Credit Ratings
Published 13 November 2025
Highlights
- The Scottish government plans to issue its first bonds, nicknamed "kilts," in the 2026-27 financial year, pending the outcome of the Holyrood election.
- Moody's and S&P Global have rated Scotland's credit as Aa3 and AA, respectively, matching the UK's sovereign rating.
- The bonds aim to fund infrastructure projects, with a borrowing limit similar to the UK's National Loans Fund.
- Independence movements could impact Scotland's credit ratings, potentially increasing borrowing costs.
- The SNP plans to issue £1.5bn in bonds if re-elected, highlighting Scotland's fiscal maturity post-devolution.
-
Rewritten Article
Scotland Prepares to Launch 'Kilts' Bonds Amid High Credit Ratings
The Scottish government is gearing up to issue its first-ever bonds, dubbed "kilts," in the 2026-27 financial year, contingent on the results of the upcoming Holyrood election. This move follows the recent affirmation of Scotland's creditworthiness by major rating agencies, Moody's and S&P Global, which have both assigned ratings equivalent to those of the UK.
Credit Ratings and Fiscal Management
Moody's has rated Scotland at Aa3, while S&P Global has given an AA rating, reflecting the country's prudent fiscal management and economic stability. These ratings are crucial as they determine the cost of borrowing and investor confidence. The agencies have highlighted Scotland's strong institutional framework and responsible fiscal policies as key factors in their assessments. However, they caution that any push towards independence could introduce financial instability, potentially leading to a downgrade.
Infrastructure Investment and Borrowing Plans
The Scottish government intends to use the proceeds from these bonds to finance significant infrastructure projects, including housing, roads, and hospitals. The borrowing limits will align with those imposed by the UK Treasury, similar to the constraints on the National Loans Fund. First Minister John Swinney emphasized that the bond issuance is about "borrowing better, not more," showcasing the maturity of Scotland's public finances after over 25 years of devolution.
Political and Economic Context
The SNP, if re-elected, plans to issue £1.5bn in bonds during the next parliamentary term. This initiative is seen as a step towards financial independence, allowing Scotland to raise funds independently. However, the specter of independence looms large, with potential economic risks such as currency questions and trade barriers. Moody's has warned that independence could exert downward pressure on Scotland's credit rating, increasing borrowing costs.
-
Scenario Analysis
As Scotland moves towards issuing its own bonds, the political landscape will play a critical role in shaping its financial future. A successful bond issuance could bolster Scotland's economic autonomy, yet the prospect of independence remains a double-edged sword. While it could empower Scotland with greater fiscal control, it also poses risks of financial instability and increased borrowing costs. Experts suggest that the outcome of the Holyrood election will be pivotal, potentially setting the stage for another independence referendum. The Scottish government's ability to navigate these challenges will be crucial in determining its economic trajectory.
The Scottish government is gearing up to issue its first-ever bonds, dubbed "kilts," in the 2026-27 financial year, contingent on the results of the upcoming Holyrood election. This move follows the recent affirmation of Scotland's creditworthiness by major rating agencies, Moody's and S&P Global, which have both assigned ratings equivalent to those of the UK.
Credit Ratings and Fiscal Management
Moody's has rated Scotland at Aa3, while S&P Global has given an AA rating, reflecting the country's prudent fiscal management and economic stability. These ratings are crucial as they determine the cost of borrowing and investor confidence. The agencies have highlighted Scotland's strong institutional framework and responsible fiscal policies as key factors in their assessments. However, they caution that any push towards independence could introduce financial instability, potentially leading to a downgrade.
Infrastructure Investment and Borrowing Plans
The Scottish government intends to use the proceeds from these bonds to finance significant infrastructure projects, including housing, roads, and hospitals. The borrowing limits will align with those imposed by the UK Treasury, similar to the constraints on the National Loans Fund. First Minister John Swinney emphasized that the bond issuance is about "borrowing better, not more," showcasing the maturity of Scotland's public finances after over 25 years of devolution.
Political and Economic Context
The SNP, if re-elected, plans to issue £1.5bn in bonds during the next parliamentary term. This initiative is seen as a step towards financial independence, allowing Scotland to raise funds independently. However, the specter of independence looms large, with potential economic risks such as currency questions and trade barriers. Moody's has warned that independence could exert downward pressure on Scotland's credit rating, increasing borrowing costs.
What this might mean
As Scotland moves towards issuing its own bonds, the political landscape will play a critical role in shaping its financial future. A successful bond issuance could bolster Scotland's economic autonomy, yet the prospect of independence remains a double-edged sword. While it could empower Scotland with greater fiscal control, it also poses risks of financial instability and increased borrowing costs. Experts suggest that the outcome of the Holyrood election will be pivotal, potentially setting the stage for another independence referendum. The Scottish government's ability to navigate these challenges will be crucial in determining its economic trajectory.
