ALRAQABA . ISSUE 20 37 Sovereign Credit Rating: Role and Importance for State’s Economy Munira Essam Al-Khaled Associate Auditor, Oil Entities Marketing and Investment Audit Department In recent years, the concept of credit rating has spread, especially after the 2008 global financial crisis, due to the inaccurate ratings of financial assets and instruments, which contributed to the intensification of the crisis. Accordingly, the pivotal role of credit rating has become more evident in supporting general economic stability, enhancing transparency, and evaluating and measuring credit risk. As a result, many specialized agencies have been established to assess the financial value of various entities, including monetary instruments, companies, banks, and governments. This article aims to shed light on the concept of credit rating in general and sovereign rating in particular while stating its significance. In addition, the article addresses the role of international agencies, rating criteria, and the impact of credit ratings on State economies and financial markets. The credit rating in the State of Kuwait will also be discussed. First: What is Credit Rating? There are many definitions of credit rating. Most of these revolve around assessing the solvency or financial capacity of companies, governments, and other entities, in addition to the extent to which they can meet their financial obligations. Independent global agencies objectively evaluate financial risks and determine the credit rating of companies, individuals, and governments. The credit rating is defined as “providing information that is standard, widely recognized, independent, and transparent about the credit risk of any entity (classified). The rating classifies the debtor’s ability to pay the debt by making principal and interest payments on time and probability of default.” It is also Articles
RkJQdWJsaXNoZXIy Mjk0NA==