The financial rating agency S&P Global Ratings has once more lowered the rating granted to Russia and warned that it might downgrade it further as the sanctions imposed on the country increase the risk that it will not repay its debt.
“The military conflict between Russia and Ukraine has triggered a new round of government sanctions by G7 countries, including those targeting the foreign exchange reserves of the Central Bank of Russia”, which have so far been an asset in the financial strength of the country, justified the agency in a press release.
“To mitigate the high exchange rate and resulting financial market volatility, and to preserve remaining foreign exchange reserves, the Russian authorities have, among other measures, introduced capital controls,” S&P said. According to the agency, these controls “might prevent holders of government bonds not residing in the country from receiving” the scheduled repayments on time.
A possible further degradation to come
S&P had already put Russia’s long-term foreign-currency debt rating in the speculative category last week, but downgraded it another eight notches on Thursday. The other two major rating agencies, Fitch and Moody’s, downgraded Russia to the speculative investment category on Wednesday.
S&P will decide in the coming weeks whether or not to lower Russia’s debt once more “once there is more clarity on the government’s technical ability and/or willingness to meet its debt obligations in full and in hour”.
