Fitch Ratings, a major U.S. credit-rating agency, has just downgraded Ukraine’s credit rating to ‘restricted default.’ This decision came after Ukraine missed a crucial payment deadline on a $750 million Eurobond that was due on August 1, 2023. The country had a ten-day grace period to make the payment, but when that expired with no payment made, Fitch dropped the rating to ‘D’ from ‘C,’ signaling severe financial trouble.
Ukraine’s government recently passed a law allowing them to temporarily stop paying off their foreign debts until October 1, 2023. This move is part of their ongoing efforts to restructure nearly $20 billion in international debt. The Ukrainian parliament approved this pause in payments on July 18, hoping it would buy them time to negotiate better terms with their creditors.
Fitch’s downgrade follows a similar move by S&P Global, another U.S.-based credit-rating agency, which also downgraded Ukraine’s rating to ‘selective default’ on August 2. Both agencies agree that Ukraine’s financial situation is dire, with Fitch noting that the country’s government debt is expected to skyrocket to 92.5% of its GDP in 2024.
The situation has been building since 2022 when Ukraine first secured a temporary deal to suspend debt payments due to the ongoing conflict with Russia. That two-year moratorium expired on August 1, and without a new deal fully in place, Ukraine’s financial standing has taken a serious hit.
Adding to the pressure, Ukraine’s public debt has soared, now exceeding $152 billion. The International Monetary Fund (IMF) also recently downgraded its economic forecast for Ukraine, lowering expected GDP growth for 2023 from 3.2% to 2.5%. This gloomy outlook is largely due to the continued strain of the conflict with Russia, which has dampened consumer and business confidence across the country.
In summary, Ukraine is in the midst of a deep financial crisis, struggling to manage its debts while dealing with the severe economic fallout from its ongoing war. The world is watching closely to see how the country navigates this challenging period and whether it can secure a restructuring deal in time to avoid a complete financial collapse.
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