LONDON, June 30 Reuters Credit rating agency Fitch downgraded its view on sovereign debt on Thursday on concerns about the rise in global borrowing costs and the potential for a flurry of new defaults.

Fitch, which monitors over 100 countries, said the UkraineRussia war was stoking problems such as higher inflation, trade disruptions and weaker economies which are all now hurting sovereign credit conditions.

Rising interest rates are increasing government debtservicing costs, Fitch39;s Global Head of Sovereigns, James McCormack, said, cutting the firm39;s view on the sovereign sector to neutral from improving.

Most exposed are emerging market EM sovereigns, but some highly indebted developed markets are at risk as well, including in the euro zone.

The number of countries seeing their credit ratings cut has begun to rise again this year as the pressures have built.

Most of the governments Fitch covers have either brought in subsidies or cut tax cuts to try to cushion the impact of surging inflation. But that carries costs.

While modest fiscal deteriorations can be absorbed by the positive effects inflation has on government debt dynamics, such effects depend on the retention of low interest rates, which are now less certain, McCormack said.

While commodity exporters will benefit from higher prices, those who have to import the bulk of their energy or food will suffer.

Gross external funding needs will be highest this year in both nominal terms and relative to…