International rating agency Fitch has downgraded Russia’s sovereign rating, warning a default is “imminent”.
It has downgraded Russia’s Long-Term Foreign-Currency Issuer Default Rating (IDR) to ‘C’ from ‘B’. It means that Russia will soon be unable to pay its debts.
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.
The move comes amid increasing international sanctions against Russia in the wake of the invasion of Ukraine.
“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.
On Sunday, Moscow assured investors that it would continue to service its sovereign debt.
However, it warned that international sanctions imposed on its energy industry could limit its ability and willingness to meet its obligations.
“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,” the finance ministry said in a statement.
In recent days, rival ratings agencies Moody’s Investors Service and S&P Global Ratings have also slashed their assessments of Russian sovereign debt.
Meanwhile, Russia’s ruble has hit a record low of more than 10 per cent since Friday, closing it at 137 against a dollar.
The reason behind this latest fall is reported to be the inability of traders to buy and sell the Russian currency, which has become more limited as fewer banks want to settle transactions against it in the offshore market.
As per a Reuters report, Russian markets are expected to remain closed for trading until at least Wednesday.
(With inputs from agencies)