Credit agency downgrades Russia to 'C' rating, says sovereign default 'imminent'
Moody's also downgraded Russia's credit rating this week
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American credit rating agency Fitch Ratings has downgraded Russia’s credit rating from a "B" to a "C" and suggested that a sovereign default is imminent as the country continues to face economic backlash from its decision to invade neighboring Ukraine roughly two weeks ago.
"The 'C' rating reflects Fitch's view that a sovereign default is imminent," the company posted on Tuesday. "This rating action follows our downgrade of the Long-Term Foreign-Currency IDR to 'B'/Rating Watch Negative on 2 March, and developments since then have, in our view, further undermined Russia's willingness to service government debt."
Russian President Vladimir Putin listens to a journalist (Yuri Kochetkov/Pool Photo via AP) (Yuri Kochetkov/Pool Photo via AP / AP Newsroom)
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The statement continued, "This includes the Presidential Decree of 5 March, which could potentially force a redenomination of foreign-currency sovereign debt payments into local currency for creditors in specified countries. In addition, the application of Central Bank of Russia regulation has restricted the transfer of local-currency OFZ debt coupons to non-residents since late last week."
Fitch’s added that the "ratcheting up of sanctions" against Russia along with the possibility its energy sector revenue will be reduced increases the "probability of a policy response by Russia that includes at least selective non-payment of its sovereign debt obligations."
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Fitch’s announcement comes shortly after financial services company Moody’s cut Russia's credit rating to "Ca", the second-lowest rung of its ratings ladder, citing central bank capital controls that are likely to restrict payments on the country's foreign debt and lead to default.
Moody's said its decision to cut Russia's rating was "driven by severe concerns around Russia's willingness and ability to pay its debt obligations."
Russia's economy has been plunged into crisis as a result of harsh sanctions imposed by the West which include freezing assets of the central bank held overseas and severing several Russian banks from the SWIFT international payments systems.
A man walks past the Moscow's stock market building in downtown Moscow on February 28, 2022. - Russia's central bank announced on February 28, 2022, it was raising its key interest rate to 20 percent from 9.5 percent as the West pummelled the country (Natalia Kolesnikova/AFP Via Getty Images / Getty Images)
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"We see a default as the most likely scenario," Simon Waever, Moody’s global head of emerging-market sovereign credit strategy, wrote on Monday. "In case of default, it is unlikely to be like a normal one, with Venezuela instead perhaps the most relevant comparison."
Reuters contributed to this report