This rating remains unchanged as long as Ukraine continues its efforts to restructure its external commercial debt, according to Fitch's latest report.
Continuation of Debt Restructuring
Ukraine remains committed to restructuring its external commercial debt, a critical step in stabilizing the nation's financial standing. Following the successful completion of the Eurobond exchange in September 2024, the Ukrainian government has taken further measures to manage its debt obligations:
- Temporary Suspension of Payments:
- Cargill Loan: A $0.7 billion external commercial loan from Cargill has had its payments suspended since September 3, 2024.
- State-Guaranteed Eurobonds of Ukrenergo: Payments amounting to $825 million, initiated on November 9, 2024, are also temporarily halted.
- GDP Warrants: Payments on GDP warrants have been suspended from May 31, 2025.
Fitch Ratings has indicated that the suspension of debt service is expected to continue until the completion of the debt restructuring process. This strategic pause allows Ukraine to focus on negotiating favorable terms with its creditors and ensuring the sustainability of its debt obligations.
Conditions for Rating Maintenance
Fitch's report emphasizes that Ukraine's long-term rating will remain at RD until the agency assesses that the debt exchanges are fully completed and that relations with the majority of external commercial creditors have been normalized. The key factors influencing this decision include:
- Completion of Debt Exchanges: Ensuring that all scheduled debt exchanges are finalized successfully.
- Normalization of Creditor Relations: Re-establishing stable and cooperative relationships with external commercial creditors to prevent future defaults.
- Ongoing Economic Reforms: Continuation of economic reforms aimed at enhancing financial stability and investor confidence.
Strategic Implications
The reaffirmation of Ukraine's rating at "Limited Default" has several strategic implications:
Enhanced Financial Stability
Maintaining the current rating provides Ukraine with a degree of financial stability, allowing the country to continue its economic reforms without the immediate pressure of debt repayments. This stability is crucial for attracting foreign investment and fostering economic growth.
International Confidence
Fitch's decision reflects a cautious optimism regarding Ukraine's ability to manage its debt restructuring effectively. It signals to international investors and financial institutions that Ukraine is making tangible progress in addressing its financial challenges.
Future Outlook
While the current rating remains unchanged, Ukraine must demonstrate consistent progress in its debt restructuring efforts and economic reforms to achieve a more favorable credit rating in the future. Successful completion of the planned debt exchanges and normalization of creditor relations will be pivotal in this regard.
Official Statements
In response to Fitch's reaffirmation, Yulia Svyrydenko, the First Deputy Prime Minister of Ukraine and Minister of Economy, stated:
“Ukraine is successfully and timely implementing the reforms provided for in the Plan for the Ukraine Facility. We are consistently fulfilling all the indicators of the plan, and this is the key to stable financial support from the European Union. We are grateful to our partners for the positive decision on the new tranche of over €4 billion. It will help us strengthen Ukraine’s macro-financial stability and ensure social spending. We continue to work on the implementation of the fourth quarter indicators and the implementation of reforms. This not only brings us closer to the European Union, but also allows business and partners to better plan their work.”
Conclusion
Fitch Ratings' affirmation of Ukraine's long-term foreign currency rating at "Limited Default" underscores the nation's ongoing commitment to restructuring its external debt and implementing essential economic reforms. As Ukraine navigates these financial challenges, continued international support and strategic economic policies will be critical in enhancing the country's financial stability and fostering sustainable economic growth.
