Brussels, Europe Brief News – According to Fitch Ratings, a leading credit rating agency, Russia will soon be unable to pay off its debts. Fitch Rating demoted its view of the country’s debt paying potential.
This comes on the surface mainly because of increasing International sanctions on Russia for invading neighbour Ukraine. A credit rating assists investors in understanding the level of risk involved in buying a country’s debts or bonds.
Statement of Fitch Ratings:
A low rating means the chance of not getting repaid is considered to be high and so an investor will charge more to lend to that country. Russia has declared that sanctions could make a negative impact on its bond payment.
Fitch has downgraded Russia’s credit rating twice during this month from category B to C and labelled the country as unable to pay its debts.
The Agency said, “This rating action follows our downgrade on March 2, and development since then has in our view and that further undermined Russia’s willingness to service government debt”.
Fitch Ratings added “The further ratcheting up of sanctions and proposals that could limit energy trade, increase the probability of a policy response by Russia that included at least selective non-payment of its sovereign debt obligations”.
Russian Oil Ban
Fitch made an announcement right after the US and UK declared that they will impose a ban on Russian oil and energy imports.
US president Joe Biden said, “ The move targeted the main artery of Russia’s Economy”. On the other hand, the European Union has announced that they will stop relying on Russian gas from now onwards.
As Russia is one of the largest exporters of energy, this sanction will badly affect its already free falling economy. However, The experts have also mentioned that this could also shoot oil prices to all-time high all in the global market..
Russia has told its investor that it will keep paying its sovereign debt but warned that International sanctions could restrict its ability to fulfil some of the defined commitments.
The Finance Ministry said, “The actual possibility of making such payments to non-residents will depend on the limiting measures introduced by foreign states in relation to the Russian Federation”.
As the European Union along with the US imposing dozens of tougher sanctions on Russia to make it pay for its invasion of Ukraine, the Russian rouble has hit its all-time low.
The Russian Central bank increased the interest rate by 20% to stop the value of its currency from sinking further.
