International rating agency S&P Global Ratings has updated its long-term sovereign credit rating and issuer's rating in foreign currency of Ukraine. Agency analysts downgraded to "CC" from "CCC" with a "negative" forecast.
This is stated in the message of the agency, Interfax-Ukraine reports.
"We expect that the Ukrainian government will begin formal negotiations on debt restructuring with private creditors in the short term and will complete this process by the middle of this year. We believe it is almost certain that Ukraine will default on its external commercial obligations," the statement said.
At the same time, S&P confirmed short-term ratings of Ukraine in foreign currency "C," in national currency "CCC +/C" and according to the national scale "uaBB." The forecast for the rating in foreign currency is "negative," and for the rating in the national currency - "stable."
It added that it is likely to reduce the rating to "SD" (selective default) during the restructuring, because in light of the long balance of payments and budgetary problems it will be considered problematic. In the absence of restructuring, the government faces debt servicing payments on Eurobonds of USD 4.5 billion in 2024 and approximately USD 3 billion on average annually in 2025-2027.
According to S&P, restructuring of hryvnia debt is unlikely, since it is mostly owned by the National Bank and domestic banks, half of which are state-owned.
The agency in the basic scenario expects that foreign grants and concessional loans will continue to cover most of the Ukrainian government's funding needs this year and likely in the next period. In particular, Ukraine will be able to raise USD 38 billion this year after USD 43 billion last year to finance the budget, despite the delay in allocating USD 8 billion from the United States.
Based on its macroeconomic and budgetary forecasts, the S&P expects public debt as a share of GDP to increase by the end of 2024 to 95% of GDP from 85.4% of GDP last year and 49% of GDP before the war, after which it stabilizes.
"With all that, we expect the share of long-term concessional loans from multilateral and official lenders in total public debt to continue to increase from the current high of 51%," the agency added.
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