Fitch Rating affirms Ukraine's rating at "Restricted Default" level

Fitch Ratings, an American credit rating agency, has affirmed Ukraine's Long-Term Foreign-Currency (LTFC) Issuer Default Rating (IDR) at Restricted Default (RD) as the country continues to restructure its external debt.

Source: Fitch Ratings

Details: Ukraine continues the process of restructuring its external debt.

"The debt service suspension is expected to last until the end of the debt restructuring process. Ukrenergo failed to pay its deferred interest on 9 November 2024. Ukraine's LTFC IDR will remain 'RD' until Fitch judges the exchanges have been completed and relations with a significant majority of external commercial creditors are normalised," Fitch said.

Ukraine's local currency ratings have been affirmed at CCC+. The country's National Bank and Ukrainian banks hold a significant portion of the national debt.

"In our view, this ownership structure would limit the benefits to Ukraine from any LC debt restructuring by creating potential fiscal costs (including bank re-capitalisation).

Such a restructuring could also create risks for financial sector stability and impair development of the domestic debt market," Fitch notes.

Fitch expects the general government deficit to remain high in 2025, at 19.1% and 19.2%, respectively.

The agency predicts that despite the recent tax hikes, high defence spending and a decline in foreign grants will contribute to the persistence of the large deficit.

Background: On 13 August, Fitch Ratings downgraded Ukraine's credit rating due to the start of the Eurobond restructuring.

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