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Markets treat every sovereign below investment grade as one asset class, and rating scales present it as a continuum of notches. The compendium asks a more practical question for governments, central banks and development partners: what kind of sovereign is this, and what kind can it next become? It places sixteen Arab sovereigns rated below investment grade or unrated into three categories defined by their relationship to their own financing: the sovereign that still chooses, the sovereign that manages a timeline, and the sovereign that has stopped choosing, plus a tier beyond the scale where indicators no longer describe capacity.
Each country is scored on a weighted 0-100 matrix across five pillars: quality of government (20), the economy (16), fiscal capacity (22), the balance sheet and external position (27) and social resilience (15), the last covering food security, poverty, employment and women's economic participation. Five overriding caps, which can only lower a grade, encode the framework's definitions: Category 1 requires a traded curve, and Category 2 requires a single fiscal authority.
For investors and lenders, the results show where balance-sheet strength is real and where it is capped by affordability, market access or state capacity. For policymakers, the paper sets out one binding constraint, one next stop and one decisive action for each of the sixteen road maps.
Key findings
- Composites range from 73.2 for Morocco to 6.4 for Sudan, with Morocco and Jordan the only Category 1 sovereigns, eight countries in Category 2, Libya and Somalia in Category 3, and Lebanon, Syria, Yemen and Sudan off the scale.
- The caps change the final category of seven of the sixteen countries, holding Bahrain at Category 2 on affordability and Algeria, Tunisia, Mauritania and Comoros on the absence of market access.
- A 20-point void separates the countries still paying from those that have stopped, which the paper treats as evidence that no stable state exists between the two.
- Lebanon ranks thirteenth, 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.
- Youth unemployment exceeds 30% in at least ten countries and female labour-force participation is below 30% in thirteen, making employment and gender the social constructs least aligned with the sovereign grade.
Summary of the paper; the full analysis is in the PDF.