Scope Ratings GmbH (Scope) monitors and reviews its credit ratings on an ongoing basis and at least annually, or every six months in the cases of sovereigns, sub-sovereigns and supranational organisations that may act as a lender of last resort.

Scope performs monitoring reviews to determine whether material changes and/or changes in macro-economic or financial-market conditions could have an impact on the credit ratings. Scope considers all available and relevant information when undertaking the monitoring review.

Monitoring reviews are conducted by performing a peer comparison, benchmarking against the rating-change drivers, and/or reviewing the credit rating’s performance over time, as deemed appropriate by the Lead Analyst or Analytical Team Head, in addition to an assessment of all aspects of the relevant methodology/ies, including key rating assumptions and model(s). Scope announces the result of each monitoring review on its website and/or on its subscription platform ScopeOne.

Scope completed the monitoring review for the Land of Saxony-Anhalt (long-term local- and foreign-currency issuer and senior unsecured debt ratings: AAA/Stable; short-term local- and foreign-currency issuer rating: S-1+/Stable) on 15 July 2025.

This monitoring note does not constitute a credit-rating action, nor does it indicate the likelihood that Scope will conduct a credit-rating action in the short term. Information about the latest credit-rating action connected with this monitoring note along with the associated ratings history can be found on scoperatings.com.

Key rating factors

The AAA/Stable rating is supported by the highly integrated institutional framework for the German Länder, which includes a robust revenue equalisation system, the federal solidarity principle, and the federal government’s primary role in absorbing shocks. This has been evident during the Covid-19 pandemic and the energy crisis triggered by Russia’s war against Ukraine. These elements enhance the Länder's capacity to manage external shocks and support the close credit alignment between the Länder and the German federal government (AAA/Stable).

Recent amendments to Germany’s fiscal framework, including the easing of the debt brake, now allow the Länder collectively to run a structural deficit of up to 0.35% of national GDP and to access up to EUR 100bn in federally sourced infrastructure funding. While this provides additional fiscal capacity, it also reflects a shift toward a more expansionary fiscal stance. Scope expects operating margins across the Länder to remain under pressure, having declined from pre-pandemic levels due to higher personnel and administrative costs as well as slower economic momentum. These factors suggest a shift toward moderately higher deficits, though within a still-supportive institutional and fiscal framework.

Saxony-Anhalt’s AAA rating is further supported by the following key credit strengths: i) prudent budgetary management, with operating performance underpinned by substantial and stable intergovernmental transfers; ii) effective debt and liquidity management, including the use of a commercial paper programme, which strengthens short-term financing flexibility and reflects strong capital market access; and iii) limited contingent liability risks, contributing to overall fiscal resilience.

Challenges are: i) an elevated debt burden; ii) constrained revenue-raising capacity and only moderate expenditure flexibility, alongside increasing spending pressures; and iii) comparatively modest structural economic, demographic and social indicators relative to peers.

The Stable Outlook represents Scope’s view that risks to the ratings over the next 12 to 18 months are balanced.

The ratings/Outlooks could be downgraded if: i) the German sovereign rating/Outlook were downgraded; ii) changes to the institutional framework were to result in notably weaker support; and/or iii) the individual credit profile deteriorated significantly and structurally.

For the latest Rating report, click here.

The methodology applicable for the reviewed ratings and/or rating Outlooks (Sub-Sovereigns Rating Methodology, 11 October 2024) is available on scoperatings.com/governance-and-policies/rating-governance/methodologies.
This monitoring note is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0.
Lead analyst: Jakob Suwalski, Executive Director

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