Moody's raises Ukraine’s sovereign rating, still assessing debt as risky

Source : 112 Ukraine

The rating outlook also changed from “positive” to “stable”
18:18, 22 December 2018

The international Moody's rating agency raised the sovereign rating of Ukraine in national and foreign currencies from "Caа2" to "Caa1".

It should be noted that the rating of “Caa1”, according to Moody's classification, means that debt obligations are considered very low quality and are subject to very high credit risk.

The rating outlook is also changed from “positive” to “stable”.

The rating on Eurobonds issued during the restructuring in 2015, confirmed at "Ca".

The rating was raised in the agreement between Ukraine and the IMF on a new loan program, which reduces the risk of default. Experts also expect that reforms will contribute to the gradual reduction of corruption. Ukraine is also expected to gradually improve its resilience to the ongoing conflict with Russia.

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Moody's argues that despite the fact that Ukraine’s external position is improving, its external vulnerability remains high, and the official financial support is crucially dependent on the IMF’s agreement on government economic policies.

"In addition, the country is still highly exposed to the risk of renewed geopolitical confrontation and indiscriminate political transition, as well as a change of leadership, which may lead to a delay or partial change in the course of reforms," the report said.

The recent Russian seizure of Ukrainian warships and seamen on these ships is likely to have a minimal impact on Ukraine’s already high geopolitical risks, unless further escalation occurs, which, according to Moody’s, is unlikely.

Moody's noted that the actual blockade of the Ukrainian ports on the Sea of Azov followed months of increasing interference with the sea transport connected with Ukraine, passing through the Kerch Strait.

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"The introduction of a limited martial law by Ukraine after this incident had a very small impact on consumer or investor confidence, as evidenced by a very short surge in hryvnia depreciation, which changed in a few days," the report said.

Earlier, the Board of Directors of the International Monetary Fund, following the meeting on December 18, approved a new program of cooperation with Ukraine under the stand-by mechanism. The volume of the 14-month program is equivalent to 3.9 billion dollars.

On December 21, Ukraine received the first tranche of the new stand-by program in the amount of about $ 1.4 billion.

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