Ukraine's recent downgrade to "limited default" has raised concerns both domestically and among international investors. However, economic expert Volodymyr Zolotorev believes that, despite the negative reputational consequences, a significant deterioration in the economic situation should not be expected.
The downgrade of Ukraine's credit rating, which Fitch Ratings recently downgraded from "C" to "RD" (limited default), has attracted the attention of the world community. Volodymyr Zolotorev believes that the initial reaction to this news will be negative, since such a rating usually means that the country is in a difficult financial situation, making it risky for lending.
“The first reaction to this will be negative, because everyone will understand that this is a country that cannot be given money. But everyone knows that there is a war here, so I don’t think that this will seriously affect the real money that comes here,” Zolotorev explains.
The expert also emphasized that there are practically no cases in the world where states defaulted in the same way as private enterprises. “In the case of an enterprise, everything is simple: there is a debt, it cannot be paid. After that, the bankruptcy procedure begins, assets are seized. Something is returned to those who gave loans. In the case of a state, this cannot be done. At least, there were no such precedents,” Zolotorev noted.
This means that although the downgrade reflects Ukraine's difficult financial situation, the mechanisms for managing such a situation in the case of a state are fundamentally different from those applied to private companies.
According to Zolotorev, the world economy is already heading towards a major default, which concerns not only Ukraine, but also such economically developed countries as the USA and Western Europe. “Ukraine’s default against this background will be barely noticeable,” the expert adds, emphasizing that the threat of default is becoming a global challenge.
The downgrade came after the Ukrainian government reached an agreement with international creditors to restructure more than $20 billion in debt, a necessary step to maintain financial stability amid the war. However, even with such agreements in place, rating agencies continue to rate Ukraine’s creditworthiness at a very low level.
