Fitch declares Ukraine in default
The US-based rating agency Fitch has downgraded Ukraine's credit rating following the nation's inability to fulfill a Eurobond debt payment. Read Full Article at RT.com.
This downgrade occurred after a Ukrainian law was enacted, enabling the deferral of external commercial debt payments until October 1. On July 18, the Ukrainian legislature passed a bill that would allow the government to pause payments on government and government-backed external commercial debt until a restructuring arrangement with creditors is finalized.
“This marks an event of default under Fitch’s criteria with respect to the sovereign’s IDR [Issuer Default Rating] as well as the individual issue rating of the affected security,” Fitch declared.
Additionally, S&P Global, another US-based rating agency, lowered Ukraine's credit rating to 'selective' default on August 2.
Negotiations for a restructuring of approximately $20 billion in international debt have been ongoing in Ukraine. The government reached an initial agreement with its principal bondholders on July 22, shortly before the payment grace period ended.
Previously in 2022, Kiev had reached an agreement to halt debt repayments following an intensification in its conflict with Russia. This two-year moratorium on payments concluded on August 1.
Earlier forecasts by Fitch indicated a sustained high state deficit for Ukraine, projected at 17.1% of the nation's GDP for this year. Defense expenditures were noted to make up 31.3% of the total economic output in 2023, and government debt is anticipated to rise to 92.5% of GDP in the coming year.
The Ukrainian Finance Ministry reported a significant increase in public debt, rising over $1 billion in June alone, bringing the total to more than $152 billion.
The International Monetary Fund updated its economic outlook for Ukraine in June, reducing the growth forecast for this year to 2.5%, down from a 3.2% projection in April, attributed to declining confidence among consumers and businesses amid ongoing conflict with Russia.
Alejandro Jose Martinez for TROIB News