The international rating agency S\u0026P Global Ratings has downgraded the long-term sovereign credit ratings of Ukraine in foreign currency from CCC + to CCC and designated the outlook for them as "

The agency attributed the downgrade to Ukraine's official announcement of a reconstruction of external foreign currency debt, which aims to restore the sustainability of public debt, as part of a recently agreed four-year agreement on an extended $15.6 billion credit line with the IMF..

S\u0026P notes that the negative outlook on the long-term foreign currency rating reflects the risks for servicing Ukraine's commercial debt, given the government's plan to restructure it.

At the same time, the rating outlook in the national currency is stable — the agency confirmed it at CCC+/C and uaBB on the national scale.

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The agency plans to publish the next rating of Ukraine in September 2023, while it does not exclude that they will decrease further.

We understand that the parameters and timing of the commercial debt restructuring are yet to be determined and depend on the IMF's public debt sustainability assessment, which is expected to be updated in early 2024..

S\u0026P noted that bilateral debt accounts for only 5% of the total government debt, while Ukraine's commercial external debt accounts for about 20% of the total government debt, and domestic government debt bonds (both in hryvnia and in foreign currency) not included in the restructuring plans and debt.

“If a commercial debt restructuring takes place in 2024, in light of continued balance of payments and fiscal issues, we are likely to label it problematic,” S\u0026P added..

The agency also notes that the medium-term macroeconomic prospects of Ukraine largely depend on the duration and development of the war, assuming there will be no cessation of hostilities in the near future.

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It should be noted that, according to the International Monetary Fund, in 2022, the gross domestic product of Ukraine decreased by 30.3%. However, 2023 is projected from falling 3.0% to rising 1.0%.. Growth will be 3.2% in 2024. At the same time, inflation in 2023 will be 20.0%, in 2024 12.5%, in 2025 8.0% and will continue to decrease. According to the IMF, despite the war, the Ukrainian authorities managed to maintain overall macroeconomic and financial stability..