Russia will soon be unable to pay its debts, according to a leading credit ratings agency.
Fitch Ratings downgraded its view of the country’s government debt, warning a default is “imminent”. The move comes amid increasing international sanctions against Russia following its invasion of Ukraine.
A credit rating is intended to help investors understand the level of risk they face in buying a country’s debt – or bonds. A low rating means the chances of not getting repaid is considered to be high – and so an investor will charge more to lend to that country. This week, Moscow itself said its bond payments may be affected by sanctions. The ratings cut – to B from C – is the second time this month Fitch has downgraded its view of Russia’s ability to pay its debts.
“This rating action follows our downgrade… on 2 March, and developments since then have, in our view, further undermined Russia’s willingness to service government debt,” the agency said. “The further ratcheting up of sanctions, and proposals that could limit trade in energy, increase the probability of a policy response by Russia that includes at least selective non-payment of its sovereign debt obligations,” it added. The announcement from Fitch came after the US and UK said they will ban Russian oil, as they step up the economic response to the invasion of Ukraine.
US President Joe Biden said the move targeted “the main artery of Russia’s economy”. Meanwhile, the European Union said it will end its reliance on Russian gas. As a major exporter of energy, the measures are aimed to hit Moscow’s finances, although experts warn this is also likely to send the price of oil and natural gas higher on global markets.
