S&P cuts Ukraine

S&P said it cut Ukraine’s foreign-currency rating to CCC+ from B- but affirmed its local-currency rating at B-. The agency also removed all the ratings from CreditWatch with negative implications, where they were placed on Feb. 25.

“The rating actions reflect our expectation of a prolonged period of macroeconomic instability in the country, due to Russia's military intervention. We believe that substantial damage to Ukraine's economy and tax-generation capacity has made government debt payment more dependent on the steady flow of international financial support,” S&P said in a press release.

However, financial aid from G-7 nations and international financial institutions will help with the increasing pile of government debt, the agency said.

“We expect government deficits to remain sizable in the next few years, due to substantial post-war reconstruction costs and significant disruptions to the government's tax mobilization capacity. There is also broader uncertainty over Ukraine's debt-to-GDP trajectory in light of unclear economic recovery prospects and the high sensitivity of the debt burden to exchange rate fluctuations, given that over 60% of government debt is denominated in foreign currencies,” S&P said.

The outlook is negative.

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