Ratings agency Fitch downgraded its debt rating on Russia again on Tuesday, a move that means the risk of a sovereign default is in its eyes.”imminent“.
Fitch, like other major agencies S&P Global Ratings and Moody’s, had already placed the country’s long-term debt rating in early March in the category of countries likely to be unable to repay their debt due to the accumulation of economic sanctions. against him after the invasion of Ukraine. But she decided on Tuesday to demote her again, to “B” at “C“, in view of the “developments that have further undermined Russia’s willingness to repay public debt“.
However, the lower this rating, the less the lenders will trust the country and the less it will be able to borrow money at reasonable interest rates.
To justify its decision, Fitch cites a presidential decree signed on March 5 that could authorize Russia to reimburse creditors of certain countries in rubles rather than foreign currency. The agency also mentions a decision by the Russian central bank to restrict the transfer of certain bonds to non-residents.
“More generally, tougher sanctions and proposals that could limit energy trade increase the likelihood of a political response from Russia that includes at least a selective non-payment of its sovereign bonds.“, points out Fitch.
It is also possible that technical barriers such as the blocking of funds transfers prevent the repayment of the debt.
A default by Moscow would be the first since 1998.