The Fitch Ratings international credit rating agency has downgraded Ukraine’s credit rating from “CC” to “C”, which means that insolvency has either already occurred or is unavoidable.
The agency’s press service reported this. According to the rating agency, this step reflects its opinion that “the July 22 principle agreement on restructuring terms between the government and some Eurobond holders, following last week’s passage of legislation by parliament enabling the government to suspend commercial external debt payments for three months, signals the start of a process akin to default.”
Fitch noted that the law approved by the Ukrainian parliament on July 18 allows the government to temporarily suspend payments on state and state-guaranteed external commercial debts.
The agency stated that it expects the country not to service its external commercial debt, including the August 1 interest payment due on the 2026 Eurobond, until a restructuring agreement is reached with bondholders.
It added that the agreement with bondholders and the law on debt suspension are in line with the government’s efforts to meet the four-year, $15.6 billion IMF program, which Ukraine completed its fourth review at the end of June.
Fitch stated that it forecasts the budget deficit to remain high at 17.1% of GDP this year, noting that defense expenditure accounted for 31.3% of GDP last year.
The agency’s forecast indicates that the public debt will rise to 92.5% of GDP by 2024.
“Fitch expects the war to continue in 2024 and 2025 within the current broad parameters,” the statement said. “While it is not clear that either party can gain a decisive advantage, there is also no sign that either is willing to make concessions, so the conflict may drag on.”
“In the longer term, we expect some kind of settlement, but we consider a ‘frozen conflict’ more likely than a sustainable peace agreement, at least for a significant period,” the report added.
