International rating agency Fitch Ratings has affirmed the Kyiv's Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) at 'B-'. The agency has also affirmed the city's National Long-Term Rating at 'BBB(ukr)'. The outlooks are stable. This is stated in the message on the site of the agency.
The affirmation reflects Fitch's unchanged base case scenario regarding the city's adequate budgetary performance, albeit prone to volatility due to ongoing budgetary and tax reforms and a weak institutional framework for subnationals in Ukraine (B-/Stable). The ratings also factor in reduced direct debt following the debt restructuring, but still high contingent liabilities.
"Kyiv benefits from its capital status, and remains one of the wealthiest cities in the country, which historically accounts for more than 20% of the country's GDP. Nevertheless, Ukraine's wealth metrics remain low by international standards (GDP per capita was USD2,123 in 2015). This leads us to assess the local economy as weak, constraining the city's ratings. Ukraine's economy demonstrated mild restoration in 2016. Fitch estimates Ukraine's GDP grew 1.1% yoy in 2016 (2015: 9.9% contraction) and expects 2.5%-3.0% growth in 2017-2018," the message says.
The weak institutional framework governing Ukrainian local and regional governments (LRGs) remains a constraint on the city's ratings. The framework is characterised by long-lasting political instability and a challenging reform agenda implied by Ukraine's IMF programme. This resulted in frequent changes in the allocation of revenue sources and the assignment of expenditure responsibilities, which hinder the predictability of LRGs' fiscal policy and its planning horizon remains short.
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