Dilip Ratha


Remittances & Migration    Diaspora Bonds    Future-Flow Securitization    Country Risk Rating


Sovereign spread and rating

Shadow ratings for unrated countries

Actual and predicted ratings for rated countries

Shadow Sovereign Ratings Paper

BBC radio interview)





Country Risk Rating

New! Sovereign ratings in the post-crisis world: an analysis of actual, shadow and relative risk ratings, October 2013

The paper presents new shadow ratings for 120+ countries as of December 2012. It also develops a new rating scale called the "relative risk rating". Post-crisis, the relative rating improved in developing economies (Azerbaijan, Ethiopia, Kazakhstan, Indonesia, and the Philippines) and deteriorated in high-income countries (Cyprus, Greece, Spain, Portugal, Ireland). Interestingly, India, Jordan, Poland, and the UK had their rating outlook downgraded by the rating agencies, but their relative rating actually improved as other countries suffered even worse downgrades.

Shadow sovereign ratings – read Economic Premise Note #63 published in August 2011.

Actual and predicted ratings for rated developing countries. This is a hand-out for my keynote presentation at the Euromoney Agency Finance Conference in Washington D.C. on June 19, 2009. Our model for predicting sovereign ratings seems to be working.

Shadow Sovereign Ratings for Unrated Developing Countries,” June 2007.

       (Listen to interview with Stephen Evans, BBC Radio, aired on April 10, 2007)


The rating model of this paper successfully predicted the rating upgrades of Brazil, Colombia, and Peru, and first-time ratings of Ghana, Kenya, and Uganda in 2007 and 2008. Since then, Albania, Belarus, Cambodia, Gabon, and St. Vincent and the Grenadines have also been rated—exactly or closely aligned with the predictions in the paper. This paper is now published as a chapter in my book Innovative Financing for Development. For more information, and a pdf version of the book, read my blog.


Sovereign risk ratings from agencies such as Fitch, Moody’s, and Standard and Poor’s affect capital flows to developing countries through international bond, loan and equity markets. Sovereign rating also acts as a ceiling for the foreign currency rating of sub-sovereign borrowers. Borrowing costs are higher for lower rated borrowers, especially when rating falls below the investment grade threshold – see

·         Stylized relationship between borrowing costs and the credit rating of sovereign bonds


As of the end of 2006, only 86 developing countries had been rated by the rating agencies. Of these, 15 countries had not been rated since 2004. Nearly 70 developing countries have never been rated- see

·          Actual and predicted ratings for rated developing countries (A more recent update)


Econometric analysis presented in the paper below suggests that these 70-odd unrated poor countries, if rated, would not lie at the bottom of the rating spectrum as commonly believed. Many are likely to be rated ‘B’ or higher, a similar range as the emerging market economies. See

·         Predicted (“shadow”) ratings for these unrated countries


There is a case for helping poor countries obtain credit ratings not so much for sovereign borrowing, but for enabling private entities to access international debt and equity capital. The enormous funding need for poverty reduction can only be met by promoting private-to-private capital flows. This point has been highlighted in the paper Beyond Aid: New Sources and Innovative Mechanisms for Financing Development in Sub-Saharan Africa,” April 2008.

Workshop on Shadow Sovereign Ratings, Georgetown, Guyana, October 15, 2007, organized by the Commonwealth Business Council.