S&P affirms B- long-term rating, stable outlook for Ukraine

S&P Global Ratings affirmed its B- long-term
foreign currency rating for Ukraine and its stable outlook for the rating, the
agency reported on Oct. 19. Ukraine’s rating potential is constrained by its
“large external refinancing risks, which necessitate continued compliance with
its IMF program,” as well as political uncertainty related to the 2019 election
campaigns and high consumer inflation, the S&P press release stated.

The rating’s stable outlook reflects the agency’s
expectation that Ukraine will continue to draw IMF leading support by securing
the newly drafted 14-month program worth USD 3.9 bln. Moreover, the new program
will have “a less demanding structural reform agenda,” prompting S&P’s
analysts to anticipate “broad compliance with program requirements” despite
political risks, the release said.

Among possible negative developments, S&P sees the
risk of Ukraine’s inability to tap capital markets for debt refinancing, as
well as a possible adverse ruling of a U.K. court on Ukraine’s USD 3 bln debt
to a Russian state fund. Ukraine’s rating could improve on boosted economic growth
(S&P sees Ukraine’s real GDP growing 2.5% in 2019 and 3.0% in 2020),
improved “external and fiscal imbalances,” as well as visible improvements in
the “security situation” in occupied Donbas, the release said.

Alexander Paraschiy: Few
developments have occurred recently to boost Ukraine’s credit ratings, other
than Friday’s announcement of the IMF stand-by arrangement. So in our view,
it’s positive that S&P kept the country’s rating and its outlook unchanged.
That will be supportive for the government’s intention to raise money from an
international Eurobond placement in the coming days.