The international rating agency Fitch Ratings has affirmed Ukraine’s long-term foreign-currency issuer default rating (IDR) at “CCC” and its long-term local-currency IDR one notch higher at “CCC+.”
“Ukraine’s long-term foreign-currency IDR reflects significant credit risk given the war and its macroeconomic and fiscal implications. These factors are offset by a manageable debt service schedule in the short term, improved foreign exchange reserves, and significant support from official partners, primarily the EU,” the agency noted on its website.
It attributed the higher rating in local currency to expectations that debt obligations denominated in local currency will be treated on a priority basis, as the majority of hryvnia-denominated debt is held by domestic banks (primarily state-owned) and the National Bank of Ukraine. According to Fitch, this limits the feasibility of restructuring such debt, as it could lead to additional fiscal costs (in particular, for recapitalizing banks).
The agency noted that in 2026, the war intensified: Russia stepped up airstrikes on various sectors of the economy and continues its de facto blockade of Ukraine’s Black Sea coast, which severely hinders key export routes; however, Russian troops have achieved only minor territorial gains. Diplomatic efforts have reached an impasse, and the positions of the parties remain diametrically opposed.
“Fitch expects the war to continue into 2027, as the prospects for a ceasefire are currently weak,” the document states.
The agency forecasts a slight contraction of the economy in 2026 (following zero growth in January–August) followed by 0.2% growth in 2027, provided that however, this latter figure depends on how well the Ukrainian economy can adapt to the expected new phase of airstrikes, the continuation of the naval blockade in the Black Sea, as well as the volume and timing of additional external financial assistance.
According to the report, Ukraine will continue to face a significant budget deficit due to weak domestic revenues (largely caused by a severe disruption of economic activity), as well as very high and inflexible expenditures, primarily related to defense. Fitch forecasts that the fiscal deficit will reach 18% of GDP in 2026 (28% excluding grants) and will decline slightly to 15.6% of GDP by 2028.
It is noted that the Ukraine Support Loan (USL) program covers a significant portion of Ukraine’s financing needs in 2026 (initial forecast: $56 billion) and 2027 (forecast: $43 billion); however, the escalation of the conflict has led to additional financing needs: $27 billion (12.4% of GDP) in 2026 and $33 billion (14.5% of GDP) in 2027; the sources to cover these needs have not yet been definitively determined.
“Support from international donors remains strong and is a key factor underpinning the credit rating. Fitch assumes that the volume of funding—primarily from the EU—will be sufficient to cover short-term financing gaps,” the document states.
At the same time, Fitch added that the prolonged persistence of significant financing needs in the medium term could lead to “donor fatigue” (particularly in the EU), given political disagreements among member states regarding the form and scale of support.
The agency noted that as of the end of 2025, the general government sector’s gross debt stood at 101.2% of GDP, and payments on Eurobonds will not begin until 2029. According to Fitch’s projections, this ratio will rise to 134.3% of GDP by 2028, driven by persistent significant budget deficits and the gradual depreciation of the Ukrainian hryvnia. Fitch treats funds under the USL mechanism and most of the financing under the ERA (Extraordinary Revenue Acceleration) program as contingent liabilities, as their repayment is contingent on Russia’s payment of reparations to Ukraine.
At the same time, the EU’s $18.1 billion contribution to the ERA program, provided through the macro-financial assistance mechanism, is counted as public debt.
According to Fitch’s projections, the current account deficit will reach 24% of GDP in 2026, while the merchandise trade deficit will amount to 40% of GDP. The agency expects the deficit to remain relatively high—averaging 20% of GDP during 2027–2028. Assuming that official external financial support continues, international reserves are projected to cover an average of 4.6 months of current external payments in 2026–2028.
