Gokhan Ergocun
25 May 2023•Update: 25 May 2023
DOHA, Qatar
Fitch, a UK-based rating agency, has placed the US' AAA long-term foreign-currency issuer default rating (IDR) on “rating watch negative.”
In a statement on late Wednesday, the agency recalled that the US reached its debt limit of $31.4 trillion in January which triggered the treasury to take extraordinary measures to avoid breaching the ceiling.
"The Rating Watch Negative reflects increased political partisanship that is hindering reaching a resolution to raise or suspend the debt limit despite the fast-approaching x date (when the U.S. Treasury exhausts its cash position and capacity for extraordinary measures without incurring new debt)," it said.
Fitch still expects a step to solve the problem before the "x-date" in the US, it noted, adding: "However, we believe risks have risen that the debt limit will not be raised or suspended before the x-date and consequently that the government could begin to miss payments on some of its obligations."
It stressed that the US' country ceiling may remain at AAA even in the scenario of a debt default.
Touching on the US economic figures, Fitch said: “Weaker-than-expected tax receipts and higher interest rates have led public finances to modestly underperform Fitch's expectations at the last review.”
"Fitch now forecasts a general government deficit at 6.5% of GDP in 2023 and 6.9% of GDP in 2024, up from 5.5% in 2022," it added.
At the beginning of the year, the US hit its debt ceiling, which led to the debt limit crisis.
On May 1, Secretary of the Treasury Janet Yellen warned that temporary measures taken to combat the effects of the crisis could be insufficient.
President Joe Biden's administration and Republican lawmakers are at an impasse over raising the debt ceiling.
