On Tuesday, March 8, the rating agency Fitch again lowered the rating it gives to Russia’s debt from B to C. In early March, Fitch had already placed Russia in the category of countries likely to default on their debt due to the accumulation of economic sanctions against him after the invasion of Ukraine. This time, this default would be, according to the agency, “imminent”.
S&P Global Ratings, Moody’s, Fitch, the major rating agencies agree that Russia risks defaulting on its debt, which means that the country may not have the capacity to repay it. For the markets, this probability is 80% today.
The agency explains its decision by a presidential decree signed on March 5 which could authorize Russia to reimburse the “ hostile countries in rubles rather than foreign currency. Since the invasion of Ukraine, the ruble has lost half its value. First consequence of this lowering of the Russian rating: it will greatly complicate the possibility for the country to finance itself at reasonable interest rates, because lenders will have less confidence in the country’s ability to repay.
It should be added that among the set of sanctions against Russia, American investors can no longer buy new Russian debt and Moscow is prevented from accessing European capital markets. Next week, the country will face a $117 million deadline to repay, which will not benefit from the possibility of being converted into rubles. A default by Moscow would be the first since 1998.
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