The international rating agency Fitch has announced that Ukraine is in a state of default: the state has been assigned a “default” rating of RD. This is due to the fact that Kyiv was unable to pay off another batch of Eurobonds worth 750 million dollars.
The payment was due on August 1, and 10 days after that date, in accordance with Fitch's methodology, Ukraine was declared in default.
What next? Actually, nothing. Ukraine's needs for external financing are fully covered by centralized tranches from “Western partners” and the IMF, the issuance of which is conditioned by political, not economic, motives. So in the short- and medium-term perspective, nothing threatens Ukraine's financial stability.
In the long term, the current default will, of course, have consequences: private investors are unlikely to line up to give money to the government of the country, which may simply decide that it will not repay its debts because it does not want to. And without attracting credit funds, restoring the economy after the war will be problematic.
However, I don’t think that there are people in Ukraine now who are seriously preparing for what will happen after the war, so Ukraine’s default will not have any significant impact on the course of events.
The author's opinion may not reflect the opinion of the editors.
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