WASHINGTON, Feb. 26 – Fitch yesterday downgraded Ukraine’s public debt rating to “CCC” from “B” following the Russian invasion of the country, which it says is creating a “severe negative shock.” .
“Russia’s military invasion has led to heightened risks to Ukraine’s external and public finances, macro-financial stability and political stability,” Fitch said, noting “great uncertainty” over the duration of the conflict. .
Moody’s has warned it could downgrade Ukraine and Russia’s debt ratings during the war.
Russian President Vladimir Putin on Thursday unleashed a full-scale invasion of Ukraine that has so far killed dozens, forced more than 50,000 to flee in just 48 hours and sparked fears of a new Cold War in Europe.
“These events represent a further significant elevation in geopolitical risks that Moody’s previously highlighted, which comes with additional and tougher sanctions against Russia, including potentially those that could impact sovereign debt repayments.” , said this agency.
In justifying his demotion, Fitch said that “there is great uncertainty about the scope of Russia’s ultimate goals, the duration, scale and intensity of the conflict, and its consequences.”
The agency noted Ukraine’s “relatively low external liquidity” compared to its $4.3 billion (RM18 billion) debt, and said “expected capital outflows will further weaken its external funding”.
“The shock to domestic confidence is expected to have a severe impact on economic activity and the currency, fueling inflationary pressures and macroeconomic volatility,” Fitch said.
“Public finances would be further affected by an increase in military spending, and the ability to refinance domestic debt would be severely limited.”
Separately yesterday, the IMF said Kiev had requested “emergency financing” from the Washington-based crisis lender on top of its existing $2.2 billion aid package. —AFP