Ukrainian Credit Rating May Be Cut Without IMF Loan, Fitch Says

Ukraine’s credit rating may be cut if the government fails to unfreeze the International Monetary Fund’s stalled lending program, said Fitch Ratings.

“Getting the IMF deal back on track would reduce refinancing risk, boost investor confidence and so underpin continuing market access,” said Charles Seville, the director of Fitch Ratings’s sovereign group, today in an e-mailed statement. Without the program, “there is a risk that reserves continue to fall, and the hryvnia depreciates in a disorderly fashion, which would likely trigger a downgrade.”

The Washington-based lender granted Ukraine a bailout in July 2010 before stalling it the following March after the government rejected demands to raise household heating tariffs. An IMF “technical” mission is in Kiev to discuss the banking industry. Fitch rates Ukraine at B, or five steps below investment grade.

Ukraine’s hryvnia is under pressure as the current-account deficit widened because of weak external demand for the country’s products. The hryvnia, which has lost 1.41 percent versus the dollar, strengthened today to 8.1550 as of 4:30 p.m. in Kiev, data compiled by Bloomberg shows.

“Ukraine’s external financing position is precarious,” Seville said. “The external financing requirement will grow in 2013 as repayments due to the IMF rise sharply to $6 billion.

‘‘This probably exceeds the government’s capacity to borrow externally and will require partial refinancing by the IMF itself,’’ Seville said.

To contact the reporters on this story: Maria Levitov in London at mlevitov@bloomberg.net; Daryna Krasnolutska in Kiev at dkrasnolutsk@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net.

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