This is (another) bad news waiting for Ukraine but it seems inevitable because the country is being destroyed by the war with Russia. The S&P agency, one of the international standards of financial ratings, strongly lowered Ukraine’s debt rating by three ranks (from CCC + to CC) on Friday. The institution is now expecting a default ” almost certainly ».
” Ukraine asks its foreign creditors to defer payments on all foreign debt for 24 months »S&P said in a statement. ” After this request, we believe that a sovereign debt default in foreign currencies is a virtual certainty. »interprets the rating agency.
Several major countries including France, the United States, Germany, Japan and the United Kingdom that hold Ukrainian bonds agreed on July 20 that Ukraine would postpone interest payments on its debt at Kyiv’s request, and urged other creditors to in Ukraine to do so. The government of Volodymyr Zelensky asked its creditors to delay payments in favor ” foreign exchange resources for priority war-related expenditures ». The agreement in question agreed to suspend Ukrainian debt service payments at least until the end of 2023 ” with the possibility of an additional year ».
The S&P rating also gives a negative outlook and expects Ukraine to make a ” debt restructuring »to be considered ” as a defect », S&P alert. The agency is also concerned ” high risk of commercial debt payments in Ukraine, due to the government’s debt restructuring plans, arising from pressures related to the economy, balance of payments and the war budget with Russia ».
On the S&P rating scale, Ukraine’s rating may be downgraded to ” SD »to find out ” Default Selection » (” partial defect »), last step before the actual default (” d »). What is the probability of the agency’s pessimistic scenario ” if Ukraine implements what we consider a bad debt restructuring, or if the government defaults on its foreign currency obligations ».
Since the invasion of its territory on February 24 by Russia, which occupied about a quarter of it, Ukraine has fallen into security chaos, and therefore economic and financial chaos with a large exodus of citizens, the cessation or conversion of its companies to war. production. The World Bank says that it predicts a decline in GDP in Ukraine by 45% in 2022. The Bloomberg economic agency estimates that the payment of Ukraine deferral measures will save Kyiv at least $3 billion within two years. .