March 2026

The article at a glance: Even the top credit rating agencies systematically disagree on sovereign debt levels, which are reported based on widely differing data and standards. This has meaningful impact on financial markets and carries a real economic cost, and underlines the importance of accounting in shaping global capital markets and economic outcomes. 

When experts disagree: what sovereign debt confusion reveals about global markets

A surprising gap in the numbers
Sovereign debt plays a central role in global financial markets, shaping how investors, policymakers and institutions assess economic stability. Yet, despite its importance, outside of the European Union there is no single enforced way to measure how much a country actually owes. In our research, we show that even the 3 major credit rating agencies – S&P, Moody’s, and Fitch – systematically disagree on sovereign debt levels, with differences averaging around 3% of GDP. While this may appear modest, it translates into very large discrepancies in dollar terms for major economies, raising important questions about the reliability and comparability of sovereign financial data.

Why measurement differs across countries
These disagreements arise because sovereign accounting lacks globally harmonised and enforceable standards. Countries report fiscal data using different definitions, scopes and methodologies, and rating agencies must apply their own adjustments to make these figures comparable. This process inevitably involves judgment, particularly when dealing with complex items such as contingent liabilities, public sector boundaries or off-balance-sheet obligations. Our findings show that disagreement is not random: it is significantly higher in countries with weaker fiscal transparency and more complex reporting environments, and lower in settings with stronger institutional constraints such as the EU.

Why markets care about disagreement
Importantly, this disagreement has meaningful consequences for financial markets. We find that greater divergence in debt assessments is associated with more frequent rating downgrades, higher sovereign bond yield spreads and an increased likelihood of default. Investors appear to interpret disagreement among rating agencies as a signal of uncertainty about a country’s true fiscal position, and they demand a higher risk premium as a result. This suggests that disagreement itself contains valuable information beyond standard measures of debt and macroeconomic fundamentals.

Beyond the headline debt number
Overall, our study highlights that it is not only the level of sovereign debt that matters, but also the clarity and consistency with which it is measured. In a world without common reporting standards, differences in how debt is defined and reported can translate into real economic costs. These findings underscore the importance of improving the transparency and comparability of sovereign financial reporting, and they point to a broader role for accounting in shaping global capital markets and economic outcomes.