Ukraine Ratings May Be Cut by S&P on IMF Loan Risk

[Joanne98]

Feb. 16 (Bloomberg) -- Ukraine’s credit ratings may be cut by Standard & Poor’s, which cited growing risks to a loan arrangement with the International Monetary Fund.

S&P placed the country’s B long-term foreign currency sovereign rating and B+ local currency rating on watch for a possible reduction of “one or more notches,” it said today in an e-mailed statement. A decision will be made in the next two weeks, depending on Ukraine’s response to a request for clarification on how it will implement the loan program.

Ukraine turned to the International Monetary Fund for a $16.4 billion loan in November, pledging to balance its state budget. The country’s decision-making has been hampered by political clashes between President Viktor Yushchenko and Prime Minister Yulia Timoshenko, whose Cabinet planned a 2.97 percent budget gap for this year.

“Political institutions remain fragile due to the deteriorating real economy and the absence of a clear and enforceable power-sharing arrangement between the government and presidency,” S&P said. “Political commitment to implementing the IMF loan’s conditions is wavering against a backdrop of sharply contracting growth, weakened terms of trade, and approaching presidential elections” probably in January 2010.

Eastern Europe’s economies have been hit by the global financial crisis and recession, which has cut demand for exports while shutting off credit and investment. Ukraine was among countries in the region that needed international aid to stabilize its banking system and the currency a time when power struggles hamper government efforts to revive economic growth.

Fitch Ratings

Another international agency, Fitch Ratings, cut Ukraine’s ratings to B, the fifth-highest non-investment grade on Feb. 12 and kept the outlook “negative,” indicating they may fall further.

http://www.bloomberg.com/apps/news?pid=20601095&sid=aEJx7aFSz8v4&refer=east_europe