The S&P Global Ratings international rating agency has downgraded the long-term sovereign foreign currency credit rating of Ukraine from "CCC" to "CC," with a negative outlook, Ukrainian media reported, citing the S&P report.
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e expect the Ukrainian government to begin formal discussions on debt restructuring with its private creditors in the short term and complete the process by the middle of this year. We consider it a virtual certainty that Ukraine will default on its external commercial obligations," the report said.
Meanwhile, S&P confirmed Ukraine's short-term foreign currency rating of "C", as well as long- and short-term national currency credit ratings of "CCC+/C" and the "uaBB" national scale rating. The forecast for the long-term rating in the national currency is "stable."
"We understand Ukraine's hryvnia-denominated government debt is not in scope for the debt restructuring plan," the agency said.
It would likely downgrade the country to "SD" (selective default) during the restructuring, as it would view the debt as problematic due to its balance of payments situation and budget problems, S&P said.
A group of Ukraine's creditors has already extended deferment of payments on official bilateral debt until the end of the IMF program in 2027, but their participation in additional debt restructuring is possible subject to the consent of private external creditors to an equally favorable debt restructuring, S&P said.
To this end, the government plans to achieve debt relief on Eurobonds before the existing moratorium on their payments expires in August this year.
Details of the restructuring will be disclosed in the coming months following the publication of the country's debt sustainability assessment (DSA) based on the approval of the third EFF program review.
In the absence of restructuring, the Ukrainian government faces debt service payments on Eurobonds of $4.5 billion in 2024 and about $3 billion on average annually from 2025 through 2027, it said.
S&P said that a restructuring of hryvnia debt is unlikely, since it is mainly owned by the National Bank of Ukraine (NBU) and local banks, half of which are state-owned. ■