Moody's, Fitch junk Russia's rating

New Delhi: Moody's and Fitch on Thursday downgraded Russia's sovereign rating to 'junk' grade following severe sanctions by western countries, a move that will lead to shooting up of the borrowing cost of the Putin administration.

While Moody's Investors Service downgraded Russia's long-term issuer and senior unsecured (local-and foreign-currency) debt ratings to 'B3' from 'Baa3', Fitch pulled down the rating on the country to 'B' from 'BBB', putting it on 'Rating Watch Negative'. The downgraded rating is in speculative or junk category reflecting default risk. It signifies that even through financial commitments are currently being met, the sovereign is vulnerable to high credit risk.

"The multi-notch downgrade of Russia's ratings and maintaining the review for further downgrade were triggered by the severe sanctions that western countries have imposed on Russia, including the sanctioning of the Central Bank of the Russian Federation (CBR) and some large financial institutions, in response to its military invasion of Ukraine and retaliatory measures taken by the Russian authorities," Moody's said in a statement. Fitch Ratings said the severity of international sanctions has heightened macro-financial stability risks, represents a huge shock to Russia's credit fundamentals and could undermine its willingness to service government debt.