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Fitch Ratings Affirmed Ukraine's Rating at "B" with a Stable Outlook

On February 26, the international credit rating agency Fitch Ratings has affirmed Ukraine's Long-Term Foreign-Currency Issuer Default Rating (IDR) at "B" with a Stable Outlook.
Fitch Ratings notes that the rating decision reflects Ukraine's long-term and multilateral support from international financial institutions, as well as an assessment of the government's policy to support macroeconomic stability as credible and demonstrates a relatively high degree of resilience to the coronavirus shock. According to the agency, Ukraine has better human development indicators compared to its peer countries. Fitch notes that Ukraine's net external credit position is about 13% of GDP and Ukraine's general government debt is somewhat lower than the average among other B-rated countries. However, governance indicators need improvement and there is a high degree of legislative and judicial risk to government's policy implementation, as well as a low level of external liquidity compared to public external debt service requirement.
The agency's Stable Outlook reflects expectations for gradual fiscal consolidation and continuation of macroeconomic policies that helped preserve broad stability in external finances during last year's shock.
The main factors that could, individually or collectively, lead to rating upgrade in the future are:

  • further reduction in external financial vulnerabilities, for example due to a sustained increase in international reserves, strengthened external balance sheet and greater financing flexibility;
  • gradual reduction of the general government debt to GDP ratio in the medium term, for example, due to post-coronavirus fiscal consolidation;
  • increased confidence that progress in reforms will lead to improvement in governance standards and higher prospects for economic growth while preserving improvements in macroeconomic stability.

The main factors that could, individually or collectively, lead to rating downgrade in the future are:

  • increased external financing pressures, sharp decline in international reserves or increased macroeconomic instability, for example stemming from extended delays in the disbursements undere the IMF programme due to deterioration in the consistency of the policy mix and/or reform reversals;
  • persistent increase in general government debt, for example due to increase in the state budget deficit, economic contraction or currency depreciation;
  • political/geopolitical shocks that weaken macroeconomic stability, growth prospects and Ukraine's fiscal and external position.

"The coronavirus shock was a real test for economies all over the world, and especially for emerging countries. As a result of the crisis, the credit ratings of about 20 developing countries were downgraded. The affirmation of Ukraine's rating at level B with a Stable Outlook reflects the macroeconomic stability that we managed to maintain during the crisis. Despite all the challenges we continue to work on strengthening the stability of Ukraine's public finances and, consequently, decreasing the country's credit risks," commented the Minister of Finance, Sergii Marchenko.
For more information on the rating upgrade, visit Fitch Rating agency's website.