Fitch Ratings has affirmed Ukraine’s capital Kyiv’s Long-Term Foreign- and -Currency Issuer Default Ratings (IDRs) at ‘B-‘ and National Long-Term Rating at ‘A-(ukr)’, the outlooks are stable, according to a posting on the agency’s website, Interfax-Ukraine reports.
“The rating reflects a weak institutional framework for the subnational in Ukraine (B-/Stable), remaining contingent liabilities denominated in foreign currency and outstanding liabilities on the non-restructured part of the city’s placement of Eurobonds. The affirmation also reflects the capital’s moderate debt and consolidated fiscal performance with a sound operating balance driven by increasing tax revenue on the back of an economic recovery,” it says.
“Fitch expects the capital city’s financial performance to remain satisfactory in the medium run with an operating margin moderately declining to 22-24% after an exceptionally strong performance between 2015 and 2017. Performance will be supported by the economic recovery and a steady inflow of current transfers from the central government. Nevertheless, it is still fragile due to the overall weakness of sovereign public finances and unpredictable fiscal changes amid ongoing uncertainty over the pace of macroeconomic stabilization. The operating margin in 2017 was 31.4%, which is slightly below the average of 38.8% in 2015-2016, as operating expenditure rose rapidly to compensate for the delay in inflation indexation in previous years,” the message reads.
According to the message, Fitch expects the capital of Ukraine to continue having a close-to-balanced budget in the medium run. After experiencing a budget surplus in 2015-2016, the city demonstrated a modest deficit before debt at 1.55% of total revenue in 2017, which was financed by accumulated cash, meaning that the city did not incur new debt,” the experts of the company said.