International rating agency Fitch Ratings affirmed Ukraine’s long-term foreign currency Issuer Default Rating (IDR) at ‘Restricted Default’ (RD) on Saturday night Kyiv time.
“Fitch believes Ukraine is still in the process of a broader restructuring, with its GDP warrants only becoming defaulted after the 31 May payment date. The long-term foreign currency IDR will remain at RD until Ukraine normalises its relations with the vast majority of its external commercial creditors,” the agency said in a publication on its website.
Fitch recalls that following last year’s restructuring of Ukraine’s outstanding sovereign Eurobonds and state-guaranteed debt of Ukravtodor, Ukrenergo has reached a preliminary agreement to restructure its $825m state-guaranteed Eurobonds (with payments suspended from 9 November 2024), which should be completed by July.
At the same time, Ukraine and the holders of the GDP warrants (for a notional amount of $2.6bn) have failed to reach a restructuring agreement, and Cargill’s $0.7bn external commercial loan, with payments suspended from 3 September 2024, has also yet to be restructured.
The agency also affirmed the local currency IDRs at ‘CCC+’, reflecting Ukraine’s continued servicing of its local currency debt. Only a small proportion (1.1 per cent as of May 2025) is held by non-residents, while the majority is held by the
National Bank of Ukraine and domestic (mostly state-owned) banks, and this ownership structure limits the benefits to the country from restructuring its local currency debt, creating potential fiscal costs (including bank recapitalisation).
As for Ukrainian-Russian ceasefire talks, Fitch mentioned the first bilateral meeting in Istanbul in three years, but noted that it did not result in any breakthroughs.
“The US administration’s declared goal of ending the war may lead to a negotiated ceasefire, but a peace agreement is unlikely due to the difficult-to-agree positions of both sides,” the agency said.
It added that the US-Ukraine mining agreement has eased diplomatic tensions, but the potential economic benefits, as well as the extent to which it could link US economic interests with Ukraine’s strategic security objectives, remain highly uncertain.
On the fiscal deficit, Fitch pointed to a reduction to 17.2 per cent of GDP in 2024, driven by strong revenue performance despite the economic slowdown, and projected the deficit to widen to 19.3 per cent of GDP in 2025.
“High spending pressures will persist even after the end of the war, as Ukraine is likely to retain a significant military force,” the agency said and also recalled the need for reconstruction over the next decade of $524bn, about 2.8 times Ukraine’s nominal GDP in 2024.
The publication notes that Ukraine’s financing needs will be comfortably met this year, leaving additional liquidity buffers for next year, with net foreign financing reaching $55bn, compared to an average of $25bn per year in 2022-24, mainly due to the advance receipt of proceeds from frozen Russian assets. At the same time, funding uncertainty for 2026 and beyond remains high. Fitch expects domestic borrowing to rise in 2026, driven by a relatively resilient banking sector and low domestic funding this year.