Sunday, June 4, 2023

Fitch Ratings Puts US Rating On Negative Watch As Debt Ceiling And…

These days an unprecedented crisis has arisen in front of the world’s largest economy America. The world’s largest economy is on the verge of defaulting for the first time in history. Meanwhile, the credit rating agency Fitch Ratings has rung a new alarm bell for America. The agency has indicated that it may reduce America’s rating in the coming days.

Fear of rating downgrade

Right now Fitch has given AAA rating to America, which is its best rating. However, the agency has now put America’s long-term foreign-currency issuer default rating on the negative watch list. This move of Fitch Ratings is understood to be a clear indication that if the US Parliament does not increase the treasury borrowing limit in time, then the rating can be downgraded.

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This prompt will be given by default

Let us tell you that right now there is a danger of running out of treasury in front of America. If no measures are taken now, then next week the American treasury may become empty and if this happens then America’s rating will be reduced by Fitch. The agency says that if the borrowing limit is not increased, it will indicate that the US is not willing to repay its liabilities on time, which will have a negative impact on the rating.

Treasury measures not enough

However, Fitch has expressed the hope that some measure will be taken to increase the borrowing limit even before the US coffers are completely empty. Fitch said in the report that the US had reached a debt limit of $31.4 trillion on January 19, 2023, and the Treasury had initiated unprecedented measures to avoid crossing the upper limit. However, even these measures of the treasury can prove to be insufficient. The treasury measure will be fully tapped by June 1, 2023.

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expected from the Senate and the House

The agency has said that as of May 23, the cash balance with the Treasury was reduced to $ 76.5 billion. On the other hand, by June 1-2, a fairly large payment has to be made. In such a situation, the X-date i.e. the date when the coffers will be completely empty is not far away. The US Senate and the House have not yet agreed to increase the borrowing limit. The developments in the coming days will entirely depend on the steps taken by the Senate and the House.

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Default will have bad effect

As far as America’s default in payment of liabilities is concerned, many international agencies have warned about its bad consequences. Defaulting in repaying liabilities by the world’s largest economy can have a huge negative impact on the global economy, which is already standing on the threshold of economic recession.

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