Dagong downgrades sovereign credit ratings of Ukraine

Chinese rating agency Dagong Global Credit Rating Co. downgraded the local and foreign currency sovereign credit ratings of Ukraine from CCC to CC on Monday, each with a negative outlook.

The escalation of conflicts in eastern Ukraine and the intensifying banking liquidity crisis have caused massive deterioration in Ukraine's debt repayment environment, Dagong said in a statement on its website.

"Since the economy is deeply mired in recession, the debt repayment resources are extremely insecure, and as the prospects for debt restructuring negotiations are dim, the debt default risk has been heightened significantly," the statement said.

In June 2015, fierce conflicts between the Ukrainian government and militia in eastern Ukraine rekindled after a brief ceasefire, putting the new Minsk ceasefire agreement on the verge of falling apart.

The political turmoil and the deep economic recession have impinged on the asset quality and liquidity of the banking sector. In 2014, the non-performing loan ratio surged to more than 15 percent and the outflow of deposits reached 30 percent.

Dagong forecast the country's economy will drop by 9 percent year on year in 2015, after a 6.8 percent decline in 2014. Endi