Moody’s, the one of the big three debt rating companies, has raised Ukraine’s local and foreign currency issuer and senior unsecured ratings to ‘Caa2’ from ‘Caa3’ and changed the rating outlook to ‘positive’ from ‘stable’.
“The upgrade of Ukraine’s government ratings to Caa2 from Caa3 is based on the following key drivers: the cumulative impact of structural reforms that, if sustained, are expected to improve government debt dynamics; the significant strengthening of Ukraine’s external position,” said Moody’s in a statement, reported Russian state news agency TASS.
“The rating upgrade was limited to one notch because Ukraine faces a heavy external debt servicing burden in 2019-21 that will require additional foreign currency funding beyond what official lenders are likely to provide over that period. The debt service for those years includes paying off the first three of the bonds issued in the 2015 debt restructuring. The risk that Ukraine will be unable to achieve a smooth refinancing of these debt obligations due to an unexpected domestic or external financial shock is a key risk, keeping the rating at Caa2 at present.”
Ukraine has been struggling to increase its international supply of capital in the face of a brutal war with pro-Russian separatists in the east and the Russian annexation of the Crimean peninsula. The International Monetary Fund has partially released a $17 billion loan package in the face of slow Ukrainian reforms required by the international body.
Ukraine has defaulted on a $3 billion bond from Russia, saying it was illegally issued under deposed President Yanykovych.