Page 58 - UKRRptSept21

Ukraine’s credit ratings have been improving but the country is still rated junk by the three main agencies.
International ratings agency Fitch Ratings upgraded Ukraine’s economic outlook from “stable” to “positive,” the agency said in a report on August 6.
Fitch currently has a B rating on Ukraine, as does international ratings agency Standard & Poor’s (S&P), while Moody’s has rated Ukraine as Caa1.
Ukraine’s economy has bounced back sharply from last year’s crisis, although it is still struggling to contain inflation that jumped back into double digits in June, reaching 10.2%. Other indicators are performing much better with industrial production climbing, real incomes rising and the construction sector gathering momentum – all major economic drivers.
Ukraine had previously struggled to move past a “stable” rating for years as it struggled to implement reforms, curb government debt and protect the economy from external shocks during the coronavirus pandemic.
“Ukraine’s credit fundamentals have been relatively resilient to the coronavirus shock, and we expect public debt to gross domestic product to fall in 2021 on the back of budget outperformance and recovering gross domestic product,” the report stated, as cited by the Kyiv Post.
Ukraine’s flexible economic policy has underpinned what Fitch describes as a “credible policy framework” in the country.
The country has also managed to build up an adequate buffer for hard currency reserves that has underpinned the hryvnia and taken the pressure off the government finances. Ukraine’s gross international reserves increased by $0.59bn, or 2.1%, to $28.95bn in July, which is just under five months of import cover. And the issuance of $1.75bn of Eurobonds earlier this year have added to large cash reserves of $2bn that have also slightly lowered financing risk, increasing stability. In addition Ukraine is expected to receive $2.7bn worth of International Monetary Fund (IMF) SDR allocations in the middle of August as part of the fund’s $650bn distribution programme to help struggling countries recover from the coronacrisis.
“The banking sector has absorbed the pandemic shock better than initially expected and its credit fundamentals have improved in recent years,” the report read.
More IMF money may be on the way as the government is still negotiating with the IMF to restart the stalled $5bn Stand By Agreement (SBA), where two tranches of $700mn and $2.2bn are still outstanding. Ukrainian president Volodymyr Zelenskiy spoke with the managing director of the IMF Kristalina Georgieva earlier this month and talks are reportedly “going well” but analysts remain cautious on the prospects of Kyiv receiving another tranche before the SBA expires towards the end of this year.
Fitch Ratings also approved of Ukraine’s pending anti-oligarch legislation, which formally defines what an oligarch is and places restrictions on politicians’ relationships with them. Under pressure from the IMF and Washington to crack down on the oligarchs Zelenskiy has launched a campaign to undo their many scams, starting with his oligarch speech in March.
The National Security and Defense Council (NSDC) also said it was ready to introduce temporary government takeovers at eight oligarch and pro-Russian
58 UKRAINE Country Report September 2021 www.intellinews.com