Moody’s upgrades Ukraine’s ratings; stable outlook

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Moody’s Investors Service, (“Moody’s”) has upgraded the Government of Ukraine’s long-term issuer and senior unsecured ratings to B3 from Caa1. The outlook on the ratings is stable.

The main driver of the decision to upgrade the ratings to B3 is the easing of Ukraine’s near-term funding challenges and the safeguards afforded to recent improvements in its external vulnerability as a result of the announced new financing programme with the International Monetary Fund (IMF)[1]. The decision to upgrade the ratings also reflects Moody’s expectation that the new IMF programme will help anchor the reform progress achieved in recent years.

Concurrently, Moody’s has affirmed the Ca senior unsecured rating on the $3 billion Eurobond that Ukraine sold in December 2013. The sole subscriber of the notes was the russian government. The bond is under dispute due to the international armed conflict between the two governments. The Government of russia (Baa3 stable) has sued Ukraine for repayment of the bond in English courts, under whose jurisdiction the bond was issued, and the case is set for trial.

The stable outlook on the B3 rating balances the country’s strengthened macroeconomic stability and moderate levels of government debt against ongoing governance challenges, improved, albeit still elevated, vulnerability to external shocks and political risks. Furthermore, Moody’s believes that the prospects for reforms needed to further enhance Ukraine’s credit profile are impaired as the authorities focus on responding to the pressures arising from the coronavirus outbreak.

Finally, Ukraine’s long-term foreign currency bond and deposit ceilings have been raised to B2 from B3 and Caa1 from Caa2 respectively, while the short-term foreign currency ceilings for bonds and deposits remain Not Prime (NP). The country ceilings for local currency bonds and deposits have also been raised to B2 from B3.

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