Fitch Ratings: America has now suffered another major blow amid the cash shortage crisis.
Fitch Ratings, one of the world’s three largest rating agencies, has cut America’s AAA-rated long-term default rating of foreign currency issuers to “negative” as the country is just a week away from its June 1 deadline. So far, no decision has been made about increasing the credit limit (debt limit). In fact, America’s Treasury Secretary Janet Yellen has already made it clear that the country will run out of cash in the first week of June and will not even be able to pay government bills. Since then, the country’s President Joe Biden, along with Republican House Speaker Kevin McCarthy, have been continuously trying to deal with this situation. But the country has not yet reached an agreement regarding the loan limit.
What does evaluation mean?
The rating agency pointed to brinksmanship regarding the credit limit as the reason for the measures. That is, the agency said the Watch Negative rating indicates increasing political partisanship that is preventing a solution to increase or suspend the borrowing limit despite the impending date (June 1, 2023). Before a rating is officially upgraded or downgraded, it is often set to “Positive” or “Negative,” a warning to investors that action may be taken by then unless the situation changes drastically.
This assessment is important for the country
We tell you that Fitch Rating is considered one of the three largest rating agencies in the world, along with Moody’s and Standard and Poor’s. This rating is important for a country because it is used to determine a country’s creditworthiness, which often affects its borrowing costs, i.e. the loan interest rate.
America’s Current Situation
House Speaker Kevin McCarthy said Wednesday that debt limit negotiations are still ongoing, but both sides disagree over spending. Republican leaders sent the House home for the weekend but told members they could be called back to vote. McCarthy also said that the Republican Party and the White House had enough time to reach an agreement.