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The general report sets out the method behind the series. It argues that treating every sovereign below investment grade as a single high-yield asset class, or as a continuum of notches, tells a government or development partner little about what to do next. It replaces that view with three states defined by the sovereign's relationship to its own financing: Category 1, the sovereign that still chooses, borrowing in a market that prices it; Category 2, the sovereign that manages a timeline of interest payments and refinancing; and Category 3, the sovereign at or in default that depends on political partners and supranational institutions. A fourth state lies beyond the scale, where the state, central bank and banks fail together.
The report converts the framework into a weighted matrix of twenty-one constructs across five pillars, each scored 0–5 and summed to a 0–100 composite: 55–74 is Category 1, 35–54 Category 2, 18–34 Category 3 and below 18 off-scale. Five overriding caps, which only ever lower a grade, prevent strengths from masking a fatal weakness, such as absent market access or state capacity at zero. A fifth pillar, social resilience, adds food security, poverty and inequality, employment and women's economic opportunity, on the argument that a sovereign's ability to pay is ultimately its population's ability to produce, consume and consent.
Key findings
- Pillar weights are 20 for government, 16 for the economy, 22 for fiscal, 27 for the balance sheet and external position, and 15 for social resilience.
- The caps alter seven of sixteen final grades: Bahrain is held at Category 2 by debt affordability, Algeria, Tunisia, Mauritania and Comoros by the absence of a market, and Libya and Somalia are lowered to Category 3 by state capacity at zero.
- A 20-point cliff separates the paying sovereigns from the four off-scale cases, with nothing between Libya at 41.4 and Lebanon at 15.6.
- The constructs measuring the machinery of payment explain most of the distance between clusters, while governance percentiles discriminate less than expected.
- Lebanon has the lowest balance-sheet pillar of all sixteen, 1.4 of 27, and is the only off-scale case that is not a territorial collapse.
Summary of the paper; the full analysis is in the PDF.