Fitch affirms Ukraine's 'restricted default' rating, downgrades 2025 GDP forecast to 2.5%
On Saturday night (Kyiv time), International Fitch Ratings Agency affirmed Ukraine's long-term foreign-currency issuer Default Rating (IDR) at 'Restricted Default' (RD).
“Fitch considers that Ukraine is still going through a broader restructuring, with its GDP warrants to become non-performing only after the 31 May payment date. The sovereign's Long-Term Foreign-Currency IDR will remain in Restricted Default until Ukraine has normalized its relations with a significant majority of external commercial creditors,” the agency said on its website.
Fitch reminds that following last year's restructuring of outstanding sovereign Eurobonds and state-guaranteed Ukravtodor debt, Ukrenergo reached a preliminary agreement on the restructuring of its $825 million state-guaranteed Eurobonds (with payments suspended since 9 November 2024), to be completed by July.
At the same time, Ukraine and holders of its GDP warrants ($2.6 billion) have failed to reach an agreement on a restructuring. An external commercial loan (Cargill $0.7 billion, payments suspended from 3 September 2024) is also still to be restructured.
The agency also affirmed that the higher Long-Term Local-Currency IDR reflects Ukraine's continued service of local-currency debt, in line with our expectation of preferential treatment of local-currency debt obligations. Only a small portion (1.1% as of May 2025) of Local Currency debt is held by non-residents, with the majority held by National Bank of Ukraine (the central bank) and domestic (mostly state-owned) banks. This ownership structure limits the benefit to Ukraine of a local-currency debt restructuring by creating potential fiscal costs (including bank recapitalization).
Regarding the Ukraine-Russia ceasefire talks, Fitch recalled the first bilateral meeting in Istanbul in three years, but noted that it did not lead to any breakthrough.
“The US administration's stated objective to end the war could result in a negotiated ceasefire but a peace agreement is unlikely due to hard-to-reconcile positions of the two sides,” the agency believes.