23 Dec 2014
Ukraine Rating Downgraded, Risks of Defaulting higher – S&P
FXStreet (Mumbai) - Standard & Poor's (S&P) has cut its long-term foreign currency sovereign credit rating on Ukraine to 'CCC-' from 'CCC', and its long and short-term local currency ratings to 'CCC+/C' from 'B-/B'. The agency affirmed negative outlook on Ukraine.
The agency also warned that a default could become inevitable in the next few months if circumstances do not change.
Key Quotes:
"A default could become inevitable in the next few months if circumstances do not change, for instance if additional international financial support is not forthcoming,"
"In our view, the currently available IMF funding (under the April 2014 program) and other committed multilateral funding would not be sufficient to boost the NBU's foreign currency reserve levels during 2015,"
"We believe the central bank will only be able to maintain a very low level of reserves, next year, of just over one month of imports. If all the program funding comes through it will support the economy's gross external financing needs, assuming some--but less than 100%--roll-over of private-sector debt and continued net debt outflows on the financial account,"
"We note that, even with continued disbursements, the program only buys Ukraine a limited amount of time.
Further significant depreciation of the exchange rate, a more severe recession, and larger-than-expected deterioration of the fiscal and external balances, would place a lot of pressure on Ukraine's ability to meet its gross financing needs without additional international financial support.”
The agency also warned that a default could become inevitable in the next few months if circumstances do not change.
Key Quotes:
"A default could become inevitable in the next few months if circumstances do not change, for instance if additional international financial support is not forthcoming,"
"In our view, the currently available IMF funding (under the April 2014 program) and other committed multilateral funding would not be sufficient to boost the NBU's foreign currency reserve levels during 2015,"
"We believe the central bank will only be able to maintain a very low level of reserves, next year, of just over one month of imports. If all the program funding comes through it will support the economy's gross external financing needs, assuming some--but less than 100%--roll-over of private-sector debt and continued net debt outflows on the financial account,"
"We note that, even with continued disbursements, the program only buys Ukraine a limited amount of time.
Further significant depreciation of the exchange rate, a more severe recession, and larger-than-expected deterioration of the fiscal and external balances, would place a lot of pressure on Ukraine's ability to meet its gross financing needs without additional international financial support.”