(Bloomberg) -- Ukraine was downgraded by Fitch Ratings after the nation began the formal process to defer payments on its external bonds and restructure $22.8 billion in sovereign debt in the wake of Russia’s invasion. 

The country’s credit score was lowered to C from CCC on Friday by Fitch, which said the government’s request to postpone foreign-debt payments constitutes a “default-like process.” The rating would be lowered again to RD if the proposal is accepted by creditors -- a move that the firm said is likely. 

“Even if not accepted, Fitch considers that the risk of missed payments or initiation of an alternative distressed-debt exchange process is high as the government seeks to preserve liquidity in the face of acute military spending pressure,” the rating company said in a Friday statement. 

The government in Kyiv filed a formal request on Wednesday, asking bondholders to agree to a two-year payment freeze and changes to coupons on its so-called GDP warrants by the middle of next month. The Finance Ministry said it “received explicit indications of support” for the plan from a select group of its biggest debt holders, including BlackRock Inc., Fidelity International and Amia Capitaland Gemsstock Ltd. The Paris Club also supported a suspension of debt servicing.

Beyond a payment delay, Fitch said a broader restructuring of the government’s commercial debt will also be required, though timing remains uncertain. The firm expects the war to continue well into next year, leading the economy to contract 33% this year -- a hit that will have long-term effects as the government estimates at least $750 billion in reconstruction costs over the next decade. 

Ukraine’s foreign reserves have tumbled, while its monthly fiscal deficit averaged $4 billion in the second quarter due to war-related spending. Fitch expects public debt to reach 92% of the nation’s GDP by the end of this year and 103% at the end of 2023.

“The ability to meet Ukraine’s extremely large financing need into 2023 largely depends on multilateral and bilateral support, which is currently uncertain,” said the statement. “And we judge that debt restructuring is a probable condition of continued external support on such a scale.”

Ukraine is rated Caa3 by Moody’s Investors Service and CCC+ by S&P Global Ratings. 

(Updates with context, detail throughout.)

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