Fitch Ratings says that it would expect Ukraine to have completed the restructuring before a $500 million eurobond maturity payable on September 23 and the second review of the International Monetary Fund's, also in September.

"On the announcement of a debt restructuring deal Fitch would expect to downgrade Ukraine's Long-term foreign currency Issuer Default Rating (IDR) to 'C'," Fitch said in a statement affirming Ukraine's Long-term foreign currency IDR at 'CC' and local currency IDR at 'CCC'.

Fitch says that it would classify the restructuring of Ukraine's sovereign external bonds as a distressed debt exchange.

"Growth volatility, fragile external and public finances, weak governance indicators and geopolitical risks constrain the ratings," Fitch said.

Fitch also says that the IMF expects real GDP to shrink 9% in 2015, after a 7% contraction in 2014. Fitch in its turn assumes that real GDP will stabilize in 2016 as inflation and interest rates subside and confidence improves, assuming that policy and geopolitical risks do not materially worsen.

"Despite fiscal consolidation, recession and currency depreciation are estimated to have pushed the burden of general government direct and guaranteed debt to over 76% of GDP in June 2015, compared with 61% of GDP at end-2014. Government debt will increase further as bank recapitalization costs materialize," Fitch said.

Fitch says that without external market access, Ukraine is currently dependent on IMF and other official financing to service external debt.

The risk that the conflict in eastern Ukraine intensifies is a major risk to the outlook, Fitch said.

Ukraine's Finance Ministry expects to agree with private creditors at a meeting on August 12 in the United States to restructure foreign debt.

"If a timely restructuring is not agreed, Ukraine may declare a moratorium on external eurobond debt service," Fitch said in its statement.