S&P cuts Ukraine debt rating amid Russia conflict, outlook negative

S&P Global Ratings on Friday (May 27) cut Ukraine’s debt rating and said the outlook is negative, due to the ongoing fallout from the Russian invasion and the expectation the conflict will not end any time soon.

The agency lowered the grade on Ukraine’s long- and short-term foreign currency debt to CCC+/C from B-/B due to the “expectation of a prolonged period of macroeconomic instability in the country.”

It was the second downgrade since the invasion began in late February.

The fighting has taken “a severe toll on Ukraine’s economy and society,” and on Kyiv’s ability to collect taxes, S&P said.

“The Ukraine government’s capacity to meet its foreign-currency commercial debt payments is contingent on the flow of donor support,” according to a statement.

Even amid massive support from Western nations and international lending institutions, the outlook later in the year remains highly uncertain, especially given the post-war reconstruction price tag, S&P said, forecasting a 40 per cent contraction of the nation’s economy this year.

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Moody’s last week also cut Ukraine’s rating a notch, citing similar concerns.

The International Monetary Fund in March approved a US$1.4 billion aid package for the war torn country, while the World Bank has approved a loan of US$350 million as part of a total package of more than US$700 million.

Ukrainian President Volodymyr Zelensky said his government needs $7 billion a month to keep its economy afloat. AFP