New York (awp/afp) – The financial rating agency S&P Global Ratings raised Ukraine’s rating to CCC+ on Friday and thus acknowledged the positive effects of the rescheduling of its short and medium-term debt, after an agreement with a group of its creditors.
The new rating is three notches above payment default and nevertheless characterizes a situation of “vulnerability”, the debtor depending “on favorable economic, financial and entrepreneurial conditions to honor its commitments”, according to S&P nomenclature.
On Thursday, the Fitch agency took a similar decision, raising the country’s rating by two notches to CC.
After the announcement of this restructuring, S&P initially lowered the country’s rating to “SD” or “selective default”, to integrate the fact that Ukraine would not meet the initial conditions of repayment.
At the end of July, its leaders obtained from a group of creditors the postponement of the payment of interest and principal on debt maturities scheduled for 2022 and 2023. According to S&P Global Ratings, the sums to be paid over the next two years, by September 2024, have thus been reduced by 40%, from 16 to 10 billion dollars.
Among the creditors parties to this agreement are the United States, Germany, France, Japan and the United Kingdom.
Under this agreement, “the risk” that the Ukrainian state lacks liquidity or fails to honor existing maturities “appears manageable”, say analysts at the rating agency.
However, there remains “a high degree of uncertainty regarding the evolution of the conflict” between Ukraine and Russia, which invaded the first on February 24, recalls S&P, which expects a contraction in gross domestic product (GDP) Ukrainian by 40% this year.
To meet its financing needs, which amount to about 5 billion dollars per month according to the agency, the Ukrainian government has relied on foreign aid, of which about 13 billion has already been paid to it, as well as on debt issues, largely underwritten by its own central bank.
This intervention by the Ukrainian central bank presents the risk of accelerating inflation and putting pressure on the course of the hryvnia, the country’s currency, underlines S&P.
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