Fitch downgrades its view of global sovereign debt


The Fitch Ratings logo is seen at their offices in the Canary Wharf financial district in London, Britain March 3, 2016. REUTERS/Reinhard Krause

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LONDON, June 30 (Reuters) – Ratings agency Fitch on Thursday downgraded its view on sovereign debt on concerns over rising global borrowing costs and the possibility of a wave of new defaults. of payment.

Fitch, which monitors more than 100 countries, said the war between Ukraine and Russia is fueling problems such as rising inflation, trade disruptions and weakening economies, all of which are now hurting living conditions. sovereign credit.

“Rising interest rates are increasing the costs of servicing public debt,” said Fitch’s global head of sovereigns James McCormack, reducing the firm’s view on the sovereign sector from “neutral” to “s ‘to improve”.

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“The most exposed are emerging market (EM) sovereigns, but some highly indebted developed markets are also at risk, including in the eurozone.”

The number of countries with credit rating downgrades began to rise again this year as pressures built up.

Most governments covered by Fitch have either introduced subsidies or cut tax cuts to try to cushion the impact of soaring inflation. But this has costs.

“While modest fiscal deteriorations can be absorbed by the positive effects of inflation on public debt dynamics, these effects depend on keeping interest rates low, which are now less certain,” McCormack said.

While commodity exporters will benefit from higher prices, those who must import most of their energy or food will suffer.

Gross external financing needs will be highest this year both in nominal terms and relative to foreign exchange reserves for emerging market sovereign states that are net importers of commodities, McCormack added.

“They now face tighter global funding conditions, and with a record share of sovereigns rated in the ‘B’ category or below, it is likely there will be additional defaults.”

The list of countries that are in default or whose financial market bond yields suggest they will currently stand at a record 17.

These 17 countries are Pakistan, Sri Lanka, Zambia, Lebanon, Tunisia, Ghana, Ethiopia, Ukraine, Tajikistan, El Salvador, Suriname, Ecuador, Belize, Argentina , Russia, Belarus and Venezuela.

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Reporting by Marc Jones; Editing by Nick Macfie

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