Ukraine sovereign rating affirmed at CCC by Fitch amid war, financing strain

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Ukraine rating affirmed at CCC

Highlights

Fitch affirms Ukraine's sovereign rating at CCC due to ongoing war-driven credit risk, with no expected near-term hostilities easing after failed U.S.-brokered talks.
Ukraine's general government deficit is projected to peak at 23.5% of GDP in 2025 with UAH3.8 trillion in defense spending, narrowing only to 20.4% by 2027.
EU's EUR90 billion Ukraine Support Loan is expected to cover most of Ukraine's 2026–2027 funding gap, with repayment contingent on unlikely Russian reparations and EU guarantees.

War, funding needs and rating rationale

As reported by Fitch Ratings, the affirmation reflects substantial credit risk tied to the war and its macroeconomic and fiscal fallout, balanced by a manageable near-term debt service profile and strong official external support. Fitch says it does not expect a near-term easing of hostilities, even after multiple rounds of U.S.-brokered trilateral talks between Ukraine, Russia and the U.S., because key disagreements over territory and security guarantees remain unresolved.

Fitch says Ukraine's general government deficit, excluding grants, widens marginally to 23.5% of GDP in 2025, driven by record defence spending of UAH3.8 trillion, or 42.5% of GDP. The agency projects only a modest narrowing to 20.4% of GDP in 2027, as military spending is likely to stay elevated.

The rating agency says near-term financing risks ease because a significant share of Ukraine's 2026-2027 funding gap is expected to be covered by the EU's EUR90 billion Ukraine Support Loan. The European Council completes the final legislative step on 23 April 2026 after Hungary drops its opposition, and Fitch notes that repayment is required only in the unlikely event that Russia makes reparation payments, with EU member states providing guarantees.

Ukraine's Long-Term Local-Currency Issuer Default Rating remains one notch higher at 'CCC+', reflecting continued servicing of local-currency debt. Fitch says most of that debt is held by domestic, mostly state-owned, banks and the National Bank of Ukraine, limiting the benefit of any local-currency debt restructuring because of possible fiscal costs, including bank recapitalisation.

Our earlier article on Fitch Ratings’ upgrade of Tanana Chiefs Conference’s Alaska revenue bonds explained that the move to ‘AA’ with a Stable Outlook was driven by sustained operating strength, tighter financial management, and improved financial flexibility. We also noted that the stronger rating can lower perceived credit risk and support better borrowing conditions, highlighting the role of resilience and disciplined operations for essential service providers.

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