Russia Cut to Junk by Moody’s, Fitch as Sanctions Mount
(Bloomberg) -- Russia's credit rating was cut to junk by Moody's Investors Service and Fitch Ratings as risks mount that international sanctions imposed in response to the country's invasion of Ukraine could undermine its capability and willingness to service debt.
Moody's downgraded Russia's long-term foreign debt rating to B3 from Baa3 Thursday. It cited “heightened risk of disruption to sovereign debt repayment given the severe and coordinated sanctions and significant concerns around Russia's willingness to service its obligations.”
That came after Fitch lowered Russia six levels to B from BBB and placed the rating on negative watch Wednesday, citing weakening external and public finances, slowing growth, elevated domestic and geopolitical risk and the potential for further sanctions. Sanctions have “heightened macro-financial stability risks” and represent a huge shock to Russia's credit fundamentals, the rating company said in a statement.
The Fitch downgrade puts Russia on par with nations including Nigeria and Bolivia, and follows S&P Global Ratings' decision to lower Russia last week to BB+ from BBB-. S&P also warned of further cuts.
Fitch pointed specifically to sanctions from the U.S. and European Union prohibiting transactions with Russia's central bank, which the rating company said will have a bigger impact on credit fundamentals than any previous restrictions. Fitch also expects further sanctions on the country's banking sector. The moves could also weigh on the nation's willingness to service its debt.
“We assume U.S. sanctions prohibiting transactions with the Ministry of Finance will not impede the servicing of Russia's sovereign debt but this is unclear and the risk of such a severe measure has increased markedly,” Fitch analysts wrote.
©2022 Bloomberg L.P.
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