Fitch reaffirms Ukraine’s ‘Restricted Default’ rating

On May 23, Fitch Ratings reaffirmed Ukraine’s 'Restricted Default' (RD) rating on its foreign currency debt for the second consecutive time. The rating on local currency debt remains at 'CCC+', indicating a very high level of credit risk.

Fitch explained its decision by citing Ukraine’s ongoing efforts to restructure its external debt obligations.

While Ukrenergo has reached an agreement with bondholders to restructure $825 million of its 2021 green bonds, other major obligations — including GDP warrants ($2.6 billion) and a $0.7 billion loan from Cargill — have yet to be restructured.

In contrast, Ukraine continues to service its domestic debt denominated in hryvnia, which supports the relatively higher local currency rating.

As of May 2025, only 1.1% of domestic government bonds are held by non-residents, according to Fitch. The majority of this debt is held by the National Bank of Ukraine and state-owned commercial banks.

The agency forecasts continued growth in domestic borrowing, particularly in 2026.

This trend is driven by expectations of declining external financial support. While Ukraine is projected to receive a record-high $55 billion in external financing in 2025 (compared to an average of $25 billion annually from 2022 to 2024), such inflows are seen as unsustainable and likely to diminish over time.

In 2025, the reliance on domestic funding remains relatively limited, leaving room for increased domestic borrowing in the coming years.

• Fitch downgraded Ukraine’s foreign currency rating to 'Restricted Default' in August 2024, following the government’s decision to initiate a restructuring of its Eurobonds.