Fitch keeps Ukraine's rating at "limited default": what does this mean

International agency Fitch Ratings has confirmed Ukraine's long-term foreign currency rating at "limited default" (RD), as Ukraine continues to restructure its external commercial debt, UNN informs.

Details

Ukraine continues the process of restructuring its external commercial debt. 

After the successful completion of the Eurobond exchange in September 2024, the government ordered to temporarily suspend payments on an external commercial loan, State-guaranteed Ukrenergo Eurobonds and GDP warrants.

In addition, the suspension of debt servicing is expected to last until the debt restructuring process is completed. On November 9, 2024, Ukrenergo was unable to pay deferred interest. The Council of Ukraine will remain at the "RD" level until Fitch recognizes that the exchange is completed and relations with a significant majority of external commercial creditors are normalized.

Ukraine's national currency ratings are maintained at ' CCC+'. A significant part of the national debt belongs to the NBU and Ukrainian banks. 

"In our opinion, such a ownership structure would limit the benefits for Ukraine from any restructuring of LC's debt by creating potential fiscal costs (including recapitalization of the bank). Such a restructuring may also create risks to the stability of the financial sector and hinder the development of the domestic debt market," Fitch said.

The agency also predicts that the general state budget deficit will remain high at 19.1% and 19.2% in 2024 and 2025. And this is despite the fact that tax increases were recently approved due to high defense spending needs and the expected reduction in foreign grants. 

Recall 

Fitch downgraded Ukraine's credit rating to 'limited default' due to the suspension of Eurobond repayments. Ukraine has begun the process of restructuring міжнародних 20 billion worth of international bonds after the Russian invasion.