Fitch Ratings on Oct. 14 affirmed Ukraine's Long-term foreign and local currency Issuer Default Ratings (IDRs) at 'B' with Negative Outlooks, Fitch said in a statement
The short-term foreign currency IDR and Country Ceiling rating are affirmed at ‘B’.
“Ukraine’s IMF program is at serious risk of going off-track at the
next review in November, mainly because policy discipline has eroded
even further, risking a delay in the disbursement of the next IMF loan
tranche,” the statement quotes Andrew Colquhoun, Director in Fitch’s
Sovereigns Group, as saying.
“An interruption in the program risks undermining the fragile
confidence in the currency and the banking system, which in turn could
add to pressure for a rating downgrade.”
Ukraine’s government has effectively abandoned the policy
commitments made at the time of the second IMF review in July 2009,
including a hike of retail gas tariffs intended to trim the budget
deficit to 6% of GDP in 2009, or 8.6% including the deficit of state
energy company NJSC Naftogaz Ukrainy (rated ‘Restricted Default’ /
Rating Watch Evolving).
Fitch projects the deficit at 8.5%, or 11.1% after consolidating
Naftogaz. Corrective action is unlikely ahead of presidential elections
in 2010 in which the current Prime Minister, Yulia Tymoshenko, will be
a main contender. Ukraine could find it difficult to finance a deficit
on this scale if the IMF and other IFI funds are not forthcoming,
without resorting more heavily to monetary financing, say Fitch’s
experts. Effectively printing money would in turn increase the risks to
the stability of the exchange rate and the broader economy, they add.
