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Fitch Ratings has affirmed Ukraine’s long-term foreign currency rating at ‘Restricted Default’ (RD). This is due to the ongoing restructuring of the country’s external commercial debt.
According to the agency, the suspension of debt service will continue until the restructuring process is completed. In particular, Ukrenergo failed to pay deferred interest on 9 November 2024.
“The rating will remain at RD until Fitch considers the restructuring process complete and until relations with most external creditors are normalised,” the report says.
Domestic debt situation
Fitch also affirmed Ukraine’s local currency rating at CCC+. The bulk of the hryvnia debt is owed to the National Bank of Ukraine and commercial banks.
The agency’s experts note that this structure limits the potential benefits of restructuring:
- It creates fiscal costs that can increase the burden on the state budget.
- There are risks to the stability of the financial sector and the development of the domestic debt market.
Budget deficit forecast
Fitch expects Ukraine’s state budget deficit to remain high in 2025, reaching 19.1-19.2% of GDP.
Despite the recent tax hikes, the key factors behind the deficit remain:
- Significant defence spending due to the ongoing war.
- Decrease in international grants, which partially covered the deficit.
The value of the RD rating
A ‘limited default’ rating indicates that the country is not meeting certain external debt obligations, but domestic payments and some operations remain stable.
Outlook.
Fitch experts predict that the restoration of normal relations with creditors and stabilisation of the economic situation are key factors for the rating upgrade in the future.
