Link to the methodology

The proposed methodology would supersede the Sovereign Rating Methodology published on 27 January 2025 if adopted after the end of the request for comment period.

Key Changes

Scope’s updated sovereign rating methodology proposes changes to its sovereign quantitative model to increase its signaling power by i) introducing a cap at the ‘bb-‘ level for the quantitative indicative rating for sovereigns with recent defaults; ii) assessing the reserves-to-imports indicator only for Emerging and Developing Economies as defined by the IMF, and iii) adjusting the calculation of select variables and thresholds.

• Past defaults

We propose to account for the associated stigma of recent defaults and distinguish between sovereigns that have never defaulted on debt obligations to private sector creditors and those that have defaulted once (or multiple times) over the past 5 (10) years. Starting from the most recent credit event, we propose to cap the quantitative indicative rating at the ‘bb-’ level, after accounting for the reserve currency and political risk adjustments, for 5 (10) consecutive years for sovereigns which have defaulted once (multiple times). This change is expected to increase the signaling power of the quantitative model for sovereigns which have recently defaulted but still have strong credit fundamentals. As the cap applies only to the quantitative indicative rating, qualitative judgement can allow the final rating to evolve more smoothly, mitigating potential cliff effects. The quantitative indicative ratings of recently defaulted sovereigns with weak fundamentals would not be affected.

• External debt sustainability

Within the sovereign quantitative model, we propose to assess the reserves-to-imports indicator only for Emerging and Developing Economies (EMDs) as defined by the IMF. This reflects our view and market convention that reserves are generally less relevant for Advanced Economies (AE) when evaluating external vulnerabilities. We also propose to assign the same weights to the current account, Net IIP and import-to-reserves indicators but distinguishing between EMDs and AE.

• Variable changes

For our quantitative model we propose to i) increase the weight of the ‘Public Finance Risk’ Pillar’ to 25% (from 20%) and reduce the ‘ESG Risk’ pillar to 20% (from 25%); ii) delete the old-age-dependency ratio in the ‘social factors’ pillar and instead add the growth in the working-age-population to the ‘Domestic Economic Risk’ pillar; iii) automatically adjust applied thresholds to GDP/capita with inflation; iv) change the private sector credit growth calculation; v) asses NPLs net of provisions to capital (rather than gross NPLs and Tier 1 capital); and vi) remove the World Bank’s Voice & Accountability variable from our governance indicator.

• Editorial/ technical adjustments

Finally, we propose to i) minimally adjust the weights/ thresholds we apply to interest payments/revenues, primary balance, debt/GDP, current account, reserves/ imports, environmental risks, and political risk; ii) move the unemployment rate to the ‘social factors’ pillar from the ‘Domestic Economic Risk’ pillar; iii) remove the biocapacity variable under the ‘environmental factors’ pillar; and iv) introduce a floor at the ‘ccc’ level for the SQM indicative rating.

When and how to submit comments

Scope invites investors, issuers, policymakers and other interested parties to comment on the methodology by 27 February 2026, as part of the agency’s ongoing commitment to transparency and open dialogue with market participants.

Please send your comments to consultation@scoperatings.com

Scope will review market participants’ comments on the proposed methodology and will publish the final version of this methodology thereafter.

The ‘Sovereign Ratings Methodology – Call for Comments’ is available for download at www.scoperatings.com or via this link.