The Scottish Government is preparing to issue its first ever bonds in the 2026–27 financial year.

First Minister John Swinney said the administration is “on track” to move ahead with the plans, although the final decision will depend on the outcome of May’s Holyrood election, borrowing requirements and wider market conditions.

The update follows ratings announcements from Moody’s and S&P Global, which both assigned the Scottish Government the same sovereign-level status as the UK.

Moody’s rated Scotland at Aa3, citing “prudent fiscal management” and economic stability, while S&P Global gave a rating of AA, describing Scotland’s economy as “strong” and operating “within a stable and predictable institutional framework that provides strong oversight and well-defined arrangements with the UK central government.”

Both agencies warned that any move towards independence could place those ratings under pressure.

Swinney said the “high credit ratings” reflect Scotland’s “track record of responsible fiscal management and pro-business environment”.

He confirmed that ministers aim to begin issuing bonds in 2026–27, with proceeds to be used for capital investment in infrastructure projects.

“This is about using the powers we have to borrow better – not more – and reflects the maturity of Scotland’s public finances after more than 25 years of devolution,” he said.

“It is the latest step in building the institutions and tools Scotland needs for a prosperous future where our country takes responsibility for its own decisions.”

The administration also published updated details on its wider borrowing programme, stating that the first issuance will form part of a planned £1.5 billion bond programme over the next parliamentary session.

The Scottish Government said it will “shortly commence engagement with banks to act as joint lead managers” to ensure that the next government can proceed “without delay” if conditions allow.

What are bonds and is this actually a big deal?

Bonds – known as gilts when issued by the UK Government – allow governments to borrow money from investors, who receive regular interest payments and are repaid the full sum when the bond matures.

Scotland has had the power to issue bonds since 2016, but has previously relied on the UK’s National Loans Fund to borrow.

Until recently, limits imposed by Westminster restricted how much could be raised through its own issuances. Scottish bonds have attracted the informal nickname “kilts”, because it rhymes with gilts and kilts are Scottish – hope you’re following this.

In 2023, then-first minister Humza Yousaf commissioned preliminary work on launching the first Scottish bonds before the end of the current parliamentary term. The Scottish Government’s Investor Panel had recommended moving ahead with bond issuance to raise Scotland’s profile in international capital markets and to attract investment.

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Angus Macpherson, Chairman of Noble and Co and former co-chair of the Investor Panel, said he was “greatly encouraged” by the progress. “This is a positive step forward and demonstrates they are serious about becoming a more investor friendly destination,” he said.

While ministers say the ability to issue bonds will support further infrastructure investment, it’s prudent to note that the sums involved will represent only a small fraction of the Scottish Government’s overall budget due to borrowing limits set by Westminster.

So essentially, the move is more symbolic than any kind of real marked shift.

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