S&P ratings on Ukraine affirmed at 'B-/B', outlook stable
S&P Global Ratings on April 20, 2018 affirmed its 'B-/B' long- and short-term foreign and local currency sovereign credit ratings on Ukraine. The outlook is stable.
"Our long-term ratings on Ukraine reflect the country's weak economy in terms of per capita income and its challenging institutional and political environment that remains heavily exposed to corruption at various levels of government," S&P said.
Moreover, its ratings remain constrained by Ukraine's large external refinancing risks, which necessitate continued compliance with Ukraine's Extended Fund Facility (EFF) with the International Monetary Fund (IMF). "Fiscal deficits are declining, although the stock of debt remains large due to the costs associated with the cleanup of Ukraine's banking sector and only gradual progress in reducing the large pension fund deficit," S&P said.
The agency positively noted, however, Ukraine's successful liability-management exercise in 2017, which reduced refinancing needs for 2019, in particular, as well as for 2020.
"Additionally, our ratings remain constrained by high consumer price inflation that continues to be well outside the NBU's target and by a transmission mechanism of monetary policy that remains weak due to the very high share of nonperforming loans (NPLs) in Ukraine's banking sector," S&P said.
The stable outlook reflects S&P's expectation that the Ukrainian government will pass reforms necessary to draw a fifth tranche under its EFF with the IMF.