CFA Level I · CFA Level I Exam · Credit Analysis for Government Issuers
Compared with a sovereign issuer, a non-sovereign government issuer such as a municipality is most likely to have:
A non-sovereign government issuer has fewer tools than a sovereign. It cannot print currency or control monetary policy, and its taxing powers are limited by law and higher levels of government, so its financial flexibility is generally lower.
- AThe ability to print currency to repay its debt
- BUnlimited ability to raise taxes at any rate
- CFewer tools to manage its finances, such as no control over monetary policyCorrect
Explanation
Non-sovereign issuers cannot create currency or set monetary policy, and their taxing powers are limited by law and by higher levels of government. This usually makes their financial flexibility lower than a sovereign's.
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