Fitch downgraded Ukraine's credit rating a notch deeper in junk territory on Friday, citing an increased probability that the conflict-hit country would default.
The rating firm lowered Ukraine to "CC" from "CCC", saying that the new International Monetary Fund aid program announced Thursday would be inadequate to meet its financing needs and private debt restructuring looked "increasingly probable."
Ukraine agreed to a $17.5 billion four-year bailout from the IMF in exchange for undertaking economic reforms.
The loan replaces a previous two-year, $17 billion program announced in April that has proven inadequate to stabilize Ukraine's finances, as the country fights a pro-Russia insurgency in the industrialized east.
"The new IMF program... will help to close Ukraine's financing gap, but an associated restructuring of privately held external debt appears increasingly probable," Fitch said in a statement.
"Sovereign creditworthiness has deteriorated."
Fitch said the country's fiscal deficit, including losses of state energy company Naftogaz, reached 13 percent of gross domestic product in 2014. It estimated that direct and guaranteed debt rose to 72 percent of GDP in 2014.
"The escalation of the conflict with rebels in the eastern regions of Donetsk and Lugansk has severely affected the economy," Fitch said.
A ceasefire between the government and the pro-Russia rebels was due to take effect Sunday in Ukraine, but fighting continued to rage on Friday.
Fitch said the economic situation had considerably deteriorated since its last review in August. Now it estimated GDP fell 7.5 percent in 2014, and would contract a further 5.0 percent this year.
"Political risks to the implementation of reforms are high," it said.