Global ratings agency Fitch has warned the United States that it may adjust its top rating of the country’s sovereign credit down from AAA as the political disputes in Washington threaten the country’s long-term financial status.
The United States government has been shut down for over a week due to disputes between Democratic and Republican leaders over the country’s debt ceiling – a limit on the amount of foreign debt that the United States government can take on.
Fitch is the only major ratings agency that has taken a negative approach to the US debt situation. Others, such as Standard & Poor’s, have avoided changing their rating of US debt in the current government shutdown, but have downgraded it previously.
Standard & Poor’s downgraded the United States’ debt from AAA to AA-plus during a previous government dispute over the debt ceiling in 2011. The agency reportedly did not believe that squabbles over debt limits were a sign of financial security.
Fitch noted that the United States could be considered as ‘in default’ if it didn’t make looming interest payments on US Treasuries. The agency reported that payment is a vital part of maintaining stable relations with investors for the long term.
The United States’ borrowing limit is currently $16.7 trillion – a figure that many in opposition have criticised as excessive and cause for concern. Despite this, most of the economic community has confidence in America’s long-term financial future.
Interest rates on short-term Treasury bills have increased steadily over the past few months as investors expressed concern at the heightened risk of a default. Several of the country’s top investment banks reportedly purged their investment funds of US bills due shortly after the debt ceiling deadline.
Economists and political leaders are confident that the United States government will reach an agreement with Republican political leaders and end the shutdown in the coming days.
