engleski

Credit Rating Agencies and State Debt Management

At the beginning of operations in the 19th century, the role of credit rating agencies was to distribute valuable information for potential investors, concerning present and future financial stability of private firms and later, sovereign states. Their purpose was to ; on one hand help potential debtors find fresh capital for their business and on the other, protect future creditors. The same principle applied to sovereign states. In theory, sovereigns with sound fiscal and monetary policies, after being graded positively by rating agencies, should indirectly get lower (or the same) interest rates on future loans and there will be an increase in demand for government debt obligations which would help them in managing and financing debt (and vice versa). Experience, especially those from the last global financial crisis, proved that not only the credit rating agencies were wrong in their primary assignment e.i. in indentifying good from bad debtors but that they had the power to keep sovereign states as ''hostages'' of their discrete choices without any political or economic effects on their business. When liquidity on global financial market is low and the debt structure of many developed and developing countries is unsustainable because of poor economic growth, the role of credit rating agencies, under current system in state debt management, is crucial for understanding future of state finances.

credit rating agencies; sovereign debt; debt management; EU debt crisis

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