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By Daryna Krasnolutska,
13 June 2016

Ukraine`s Junk Rating Unchanged at S&P as Cabinet Seeks IMF Cash

S&P says Ukraine made progress toward accessing bailout funds. Ukrainian government needs to fight "widespread" corruption

Ukraine`s junk credit rating was left unchanged by S&P Global Ratings, which said the eastern European nation`s new government has made progress toward accessing bailout funds, but it must fight "widespread corruption" while the situation in the country`s war-torn easternmost regions remains uncertain.

S&P on Friday left the nation`s long-term sovereign debt rated at B-, six levels below investment grade and on par with Iraq and Ghana, according to a report. The nation`s outlook is stable as the the ratings company predict the government will maintain access to financing from the International Monetary Fund. Fitch Ratings and Moody`s Investor Service rate Ukraine at the same level.

Ukraine, which restructured $15 billion of state debt last year and has been fighting Russia-backed separatists for more than two years, is emerging from a political crisis that`s delayed disbursements from its $17.5 billion IMF bailout. Prime Minister Volodymyr Hroisman`s cabinet, which took over in April, has pledged to resume cooperation with the Washington-based lender to underpin recovery from a recession and boost reserves. The IMF`s board will decide in July on disbursement of $1.7 billion, paving the way for at least another $1.7 billion in other aid.

"We believe broader reforms will continue, albeit with setbacks, and that Ukraine`s western partners will remain engaged," S&P analysts led by Ravi Bhatia in London said in a statement. "We remain cautious on the fiscal outlook, owing to the sizable risks that still remain, including the conflict in the East, and large contingent liabilities, included two court cases relating to a US$3 billion Eurobond issued to Russia."

Growth Outlook

While the nation`s economy, which retreated 9.9 percent in 2015, will probably return to growth in 2016, its prospects remain "challenging," S&P said. Gross domestic product is set to expand 1 percent, helped by "a slight improvement in confidence and investment thanks to a more predictable political environment, lower inflation, and currency stabilization," it said.

S&P classifies Ukraine`s banking industry in its highest-risk category as it estimates non-performing loans at 40 percent of total, according to the statement.

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