International rating agencies S&P Global Ratings and Fitch have downgraded Ukraine’s foreign currency credit ratings to selective and limited defaults, as they consider the country’s debt restructuring problematic. Decisions were made on Friday, August 12.
S&P downgraded Ukraine’s foreign currency rating from “CC/C” to “SD/SD” (selective default).
“Given the announced terms and conditions of the restructuring and in line with our criteria, we view the transaction as problematic and tantamount to a default,” the ratings agency said.
Fitch downgraded the country’s long-term foreign currency rating from ‘C’ to ‘RD’ (limited default).
Ukraine’s national currency rating was also downgraded.
S&P also said war-related macroeconomic and fiscal problems could weaken the Ukrainian government’s ability to maintain current payments on its national currency debt. In this regard, Ukraine’s national currency rating was also downgraded – from “B-/B” to “CCC+/C”.
Ukraine, as experts expect, could face an economic slowdown of 35% to 45% in 2022 and a monthly budget deficit of $5 billion (4.8 billion euros).
Kyiv received a foreign debt deferral
The request for consent to defer payment of Ukraine’s external debt for two years was agreed with the required share of bondholders and took effect on August 11.
A group of Ukraine’s external commercial creditors, on which the country’s financial support from the International Monetary Fund (IMF) depends, agreed on July 20 to a coordinated suspension of Ukrainian debt service from August 1, 2022 until the end of 2023. Previously, the government in Kyiv asked for this. “We, a group of Ukraine’s creditors, express our solidarity and support for Ukraine in its defense against Russia’s unjustified, unprovoked and illegal war of aggression,” the German finance ministry said in a statement on its website. The possibility of extending the postponement by one year was also mentioned. The group includes Canada, France, Germany, Japan, the United Kingdom and the United States.
On Wednesday, August 10, Ukraine received a $20 billion deferral on its foreign debt for two years.
Source: DW
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