Ukraine credit tier dips to ‘selective default’
WASHINGTON—The US ratings agency S&P cut Ukraine’s credit rating to “selective default” on Friday, citing the war-torn country’s failure to make a coupon payment on an existing bond.
“The rating actions reflect the missed payment on the coupon of Ukraine’s 2026 Eurobond,” S&P said in a statement explaining its decision to downgrade Ukraine’s credit rating to “SD/SD” from “CC/C.”
“We do not expect the payment within the bond’s contractual grace period of 10 business days,” it continued, adding that this view was based on “the passage of a Ukrainian law in mid-July that authorizes the government to temporarily suspend payments” on some debt liabilities.S&P’s decision follows the July 24 decision by Fitch—another top US ratings agency—to downgrade Ukraine’s credit rating to “C” from “CC,” leaving it just one notch above default.
Fitch said in a statement that its decision was based in part on its view that an agreement Ukraine struck with some Eurobond holders “marks the start of a default-like process.”
Ukraine’s economy has been battered by the ongoing Russian invasion, which is now well into its third year.
The International Monetary Fund recently downgraded Ukraine’s economic outlook, citing a series of “devastating” Russian attacks against its energy infrastructure, while approving a $2.2-billion payout to support the country’s budget under an existing loan agreement.
Meanwhile, Fitch downgraded Kenya’s credit rating Friday following its president’s decision to scrap key measures of a controversial finance bill in the face of strong public opposition.
Violent reaction
Kenyan president William Ruto canceled a raft of planned tax hikes in late June after the initially peaceful rallies by those opposing the measures turned violent, leaving more than 20 people dead and the country’s parliament ransacked.“The downgrade reflects heightened risks to Kenya’s public finances after the government backtracked on revenue measures in the Finance Bill 2024,” Fitch said in a statement, adding that the outlook was “stable.”
Fitch’s announcement follows a similar decision last month by Moody’s, another major US ratings agency, which cut Kenya’s debt rating further into junk territory and warned that the outlook was negative due to the tax hike reversal.
Ruto’s decision to withdraw the controversial tax measures failed to quell the protests, leading him to sack almost his entire 22-person cabinet two weeks later and replace them with a “broad-based” government that included four heavyweight opposition politicians.But despite these steps, Fitch said on Friday that “the risk of prolonged social unrest remains, significantly complicating the environment for fiscal consolidation and presenting downside risks to economic activity.” —AFP
