Fitch affirms Ukraine at 'B', outlook positive
Fitch Ratings has affirmed Ukraine's Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDR) at 'B', the outlook is positive, the rating agency said on its website.
"Ukraine's ratings balance improved policy consistency and credibility, a record of multilateral support, and low government debt against low external liquidity relative to high financing needs associated with large sovereign debt repayments, a vulnerable, albeit improving, banking sector, and weak governance indicators," it said.
"The positive outlook reflects Fitch's expectation that continued engagement with the IMF under a new multi-year program will help support a sustained reduction in refinancing risks by facilitating access to additional external financing (official and market), entrench improved macro financial stability and fiscal sustainability, and reduce the scope for reform reversals," Fitch stated.
"Ukraine has made significant progress in obtaining legislative approval for a series of reforms that if effectively and credibly implemented, could help address structural weaknesses that weigh on growth prospects and institutional quality. A new government has been recently appointed by parliament under the leadership former Deputy Prime Minister Denys Shmyhal. The near-term challenges for the new cabinet will be to avoid uncertainty over continuity of economic policy, manage a smooth transition in the negotiation process towards a new IMF program and reinforce the credibility of the Zelensky administration's commitment to reform," according to the document.
"Fitch's baseline scenario is that Ukraine obtains final IMF Board approval for a new program in H1, 2020, but further delays cannot be ruled out. Risks to the EFF's approval and implementation stem from Ukraine's weak track record in completing previous programs, potentially negative judicial rulings that lead to reform reversals, execution risks after reforms are approved in parliament, disruptive cabinet overhauls, potential fragmentation of the president party's Rada representation and the influence of still powerful oligarchs and other vested interests," the agency experts said.