Following Ukraine’s last-week success in obtaining a two-year respite on its foreign debt from creditors, Fitch and S&P have raised the war-torn nation’s credit rating.
On Thursday, as per AFP Fitch said that the August 11 deal alleviates “external debt servicing pressure, in the context of weakening international reserves and acute war-related spending needs,” giving Kyiv breathing room on approximately $6 billion in principal and interest outstanding on Eurobonds.
In spite of the fact that Fitch has improved Ukraine’s rating from RD to CC, the rating still indicates that there is still a chance of default.
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“Despite this debt servicing relief, the ‘CC’ rating reflects unresolved debt sustainability risks resulting from Russia’s attack and Ukraine’s highly stressed public and external finances and macro-financial position,” warned Fitch.
Just a day later, on Friday S&P joined Fitch in upgrading Ukraine’s credit rating.
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In a statement, the agency said that raising the country’s foreign debt credit rating to CCC+ “reflects strong committed international financial support to Ukraine, coupled with eroding, albeit still relatively high, foreign exchange reserves.”
“As a result, the near-term risks to the government’s liquidity position and, more broadly, its capacity to honor commercial debt, including in foreign currency, appear manageable,” AFP reported S&P as saying.
However, S&P stated this is based on the presumption that donors like the US and EU will continue to fund Kyiv in the months ahead.
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It also said that a loan agreement with the IMF might lower Ukraine’s burden.
Even with the increase, S&P cautioned that because of the ongoing conflict with Russia, Ukraine’s ability to pay its debts on time “is highly dependent” on variables largely outside of government control”.
Last week, Fitch had downgraded Ukraine’s ratings to restricted default, while S&P Global had downgraded the nation to selective default.
(With inputs from agencies)
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