Rating agency Fitch downgraded Russia’s debt rating again, a decision that means the risk of a sovereign debt default is “imminent,” Agence France Press reported.
Fitch, like the other major rating agencies, placed Russia’s long-term debt note in the risk category of not being repayable in early March.
In a statement issued in New York, the agency decided to lower it again from “B” to “C”, due to the evolution of events “that have undermined Russia’s will to repay the public debt.”
The lower this note, the less creditors will trust the country and the less chance it will have of raising money at reasonable interest rates.
To justify its decision, Fitch cited a March 5 presidential decree authorizing Russia to repay creditors of some countries in rubles instead of foreign currencies.
The agency also mentioned a decision by the Russian central bank to limit the transfer of some obligations to non-residents.
“Strengthening sanctions and proposals likely to limit energy trade increase the likelihood of a political response from Russia that includes at least a selective default on its sovereign debt,” Fitch said.
It is also possible that technical barriers such as blocking of funds transfers prevent debt repayment.
If this were the case, it would be the first time Russia has declared a “default” since 1998.
The Central Bank of Russia today suspended the sale of foreign currency in the local market for six months to face the sanctions ordered by the main Western powers for the invasion of Ukraine.
“Banks will not be able to sell foreign currency to citizens” between March 9 and September 9, the Russian Central Bank said in a statement.
The monetary authority clarified that citizens will be able to exchange their currencies for rubles during that period.
Holders of foreign currency accounts in Russian banks will not be able to withdraw more than $10,000 until September 9.
If they want to withdraw more money, they will have to do so in rubles, at the official rate of the day, in accordance with the new provisions.
Last week, the agency Morgan Stanley Capital International (MSCI) placed Russia on the bottom rung of its ratings as “Isolated Market”, not suitable for making investments or buying debt.
