It refers the government is less capable to meet its financial/ debt obligations. Negative outlook results higher cost to government borrowings, stable outlook results less cost to government borrowings. Credit rating agencies are considers various factors before assign ratings.
* Political risk
* Growth prospects
* External liquidity (Market opportunities to convert liquid assets into cash)
* International Investment Position
* Fiscal performance ( How well a country use assets)
* Debt burden
* Flexibility of the monetary system
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