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Ok, so first of all, for a developing Country, it is more likely that they would be seeking funds from international Investors. And from an investor point of view, as a rule Of Thumb, it is almost always more Risky to invest Abroad than Locally.Investments are rated by credit Agencies Standard & Poor, Moody's and Fitch Group.etc.Investments for all sort of things are rated. Credit ratings basically express the agency’s opinion about the ability and willingness of an issuer, such as a corporation or state or city government, to meet its financial obligations in full and on time.So basically they represent the Risk that an Investor faces on any given investment.The Ratings range from ' AAA' all the way to ' D ', based on Standard & Poor's Ratings.'AAA' - Being the strongest capacity to meet financial commitments.'D'- Payment Default on Financial Commitments.Any one seeking funds would want that they get a higher rating.As a higher rating, means its less risky and consequently,High Risk= High Reward,Low Risk= Low RewardSo for a less Risky Investment, you would have to provide Lower Returns. And Vice Versa.Further, if your credit rating was particularly Worse, investors may deem the investment too risky even with the added return to actually make an investment.An added point from a developing country's prospective is that they are likely to require funds for longer periods of time.Given the liquidity Preference Theory, the more time you hold onto cash, the more return you have to provide. This would sort of be an unavoidable obstacle for a developing Country, so they would definitely want their rating to be as high as possible to counter act some of the high cost of long term financing.
