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 age...