Since Kommuninvest only makes loans to its owners, Swedish municipalities and county councils, who also act as guarantors for Kommuninvest's obligations, Kommuninvest's creditworthiness is linked strongly to that of the local government sector.

The local government sector has a high level of creditworthiness:

A municipality or county council cannot be declared bankrupt

Their special status according to the Swedish constitution and the right of local authorities to levy taxes mean that municipalities and county councils cannot be declared bankrupt. Nor can they cease to exist for other reasons. Moreover, pledging municipal or county council property as collateral for loans is banned, meaning that the local authorities assume responsibility for their commitments with the full backing of their tax levy and combined assets.

The right to levy taxes and set tax rates

Municipalities and county councils in Sweden have a constitutional right to charge taxes for carrying out their remit. The tax base is based on the residents' income, and each municipality and county council sets its own tax rate. Income from taxation accounts for just over 70 percent of all funding.

The constitutional right to levy taxes is an important aspect of local self-government, the principles of which guarantee autonomous decision-making rights for municipalities and county councils. The level of autonomy granted in Swedish local government is uncommonly high by international standards.

Strong system for balancing municipal finances

To ensure that all municipalities and county councils, irrespective of their tax base and structural conditions, have an equal foundation for providing their residents with services, Sweden has a system of balancing incomes and costs. Income equalisation evens out differences in the tax bases of the municipalities and county councils and is mainly funded by the state. Cost equalisation evens out differences in structural costs and is neutral in terms of state finances. Municipalities and county councils with a favourable structure pay a charge, while those with an unfavourable structure are paid a cost equalisation grant.

Strict financial requirements and regulations

High demands are placed on the economies of the municipalities and county councils in Sweden. The balance requirement means that the budget normally has to be set up such that revenue exceeds expenditure. Decisions to introduce new expenses during the budget year must detail how these are to be funded. If a local authority incurs a deficit, it must, with reference to the balanced budget requirement, adopt a plan for restoring a positive balance within three years.