12:04 03.09.2020

Japan R&I upgrades Ukraine to B+

2 min read
Japan R&I upgrades Ukraine to B+

Japan Rating and Investment Information, Inc. (R&I) has upgraded Ukraine's foreign currency issuer rating from B to B+, rating outlook is stable.

"When fiscal consolidation efforts to date and enhanced resilience to external shocks are also taken into account, economic and fiscal conditions are expected to recover in 2021 and beyond," R&I said in a Thursday press release.

R&I said that the International Monetary Fund (IMF) financial support for Ukraine, together with loans from the World Bank and the European Union (EU), will help stabilize the government's funding, which R&I views favorably.

R&I believes that the improved political and social stability under the leadership of President Volodymyr Zelensky will allow the government to focus on rebuilding the economy.

R&I said that among other positive moments is that foreign reserves are on the rise, standing at $28.8 billion as of end-July 2020, which covers 4.9 months of imports. Gross external debt is declining as a percentage of GDP. As of end-March 2020, the ratio was 75.8%. With external debt maturing within one year falling to 29.3% of GDP, the short-term external debt to foreign reserves ratio declined to around 1.6x from more than 2x seen until the previous year.

There is little concern over the government's foreign currency liquidity, R&I said.

The banking sector has improved profitability. Supported by growth in deposits, the sector also maintains stability on the liquidity front.

"R&I will follow their [government and National Bank of Ukraine's] efforts to ensure financial stability, as the impact of the coronavirus is anticipated to emerge going forward," the agency said.

In R&I's view, containing infections, reinforcing the healthcare system and rebuilding the economy are top priorities for the government's fiscal policy.

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