Fitch Ratings has lowered its forecast for sovereign debt Due to concerns about rising global borrowing costs and the possibility of a new wave of defaults.
Fitch, which monitors more than 100 countries, said the war between Ukraine and Russia was fueling problems such as high inflation, trade disruptions and weak economies, which are now hurting sovereign credit conditions.
“Higher interest rates are increasing government debt service costs,” said James McCormack, head of the sovereign ratings unit at Fitch, reducing the company’s view of the sovereign sector to “neutral” from “improving.”
Once again, the number of countries experiencing downgrades in their credit ratings began to increase this year as the pressure mounted.
Most of the governments covered by Fitch have either introduced subsidies or implemented tax cuts in an effort to mitigate the impact of higher inflation. But this had its cost.
“While a moderate fiscal deterioration can be absorbed by the positive effects of inflation on government debt mechanisms, such effects depend on maintaining low interest rates, and this is no longer certain,” McCormack said.
While commodity exporters will benefit from higher prices, those who have to import the bulk of energy or food will suffer.
The number of countries in the list of countries that are in default or whose bond yields in the financial markets indicate that this has happened is 17, which is a record level.
These countries are Pakistan, Sri Lanka, Zambia, Lebanon, Tunisia, Ghana, Ethiopia, Ukraine, Tajikistan, El Salvador, Suriname, Ecuador, Belize, Argentina, Russia, Belarus and Venezuela.