MOSCOW (Sputnik) – Moody’s Investors Service has upgraded Ukraine’s sovereign rating from Ca to Caa3, also changing the outlook from negative to stable.
"Moody's decision to assign a stable outlook on the government's Caa3 issuer rating reflects the current balance of risks, taking into account both the stronger external position — including an easing of debt service requirements in the coming years — and continuing multilateral/bilateral financial support, against a still highly fragile political and economic situation," the ratings agency said in a Thursday release.
According to Moody’s the Thursday upgrade of Ukraine’s sovereign rating was driven, in part, by progress in political and economic reform under the auspices of the International Monetary Fund (IMF) program.
"Settlement of the restructuring of USD15 billion in privately-held Eurobonds issued or guaranteed by the government, which eases Ukraine's debt-service requirements and strengthens the country's external liquidity" is another key driver behind the rating increase, Moody’s said.
Earlier on Thursday, Fitch upgraded Ukraine’s long-term foreign currency Issuer Default Rating (IDR) from RD (Restricted Default) to CCC and the short-term foreign-currency IDR from RD to C.
Ukraine’s economy was significantly weakened by the 2014 change of power and the subsequent outbreak of hostilities in the country’s southeast.
Ukraine’s overall state debt amounts to $70 billion.
On Monday, Russian President Vladimir Putin announced that Moscow was ready to allow Ukraine not to pay back Russia its $3 billion Eurobonds debt this year, but pay $1 billion annually between 2016 and 2018.
The International Monetary Fund (IMF) is currently preparing a reform of its lending-into-arrears policy, which will prevent a halt of IMF aid to Ukraine in case of a default.
Fitch said on Thursday that a formal decision by the IMF to change the policy could lead to further positive rating action.
However, according to Fitch, a swift economic recovery is "unlikely" in Ukraine.
The ratings agency predicted on Thursday that Ukraine’s economy would contract on an annual basis by 11.6 percent in 2015, projecting growth of 1 percent in 2016, and 2-3 percent in 2017.