Fitch analyzed Ukraine's credit profile

Fitch Ratings, international rating agency, says that the International Monetary Fund support is a key factor for sovereign creditworthiness of Ukraine. 

It was reported by Fitch.

It's noted that IMF programme delays remain a source of uncertainty despite of easing inflationary pressures, moderating economic imbalances and declining debt support Ukraine's sovereign credit profile.  

The programme is a key factor for sovereign creditworthiness, as it mitigates low external liquidity and reduces refinancing risks.

Increased exchange rate flexibility and monetary policy focused on price stability and prudent banking regulation have helped macroeconomic stability improve. 

At the same time Fitch says the low external liquidity is the key weakness of sovereign credit. 

Exchange rate flexibility and moderate external imbalances should limit near-term balance-of-payments pressures, but the IMF programme is key to preserving international reserves and meeting rising sovereign debt payments.

"Pension reform, an updated privatisation bill, and passing a law to set up an independent anti-corruption court, including an amendment to meet international commitments, highlight the government's efforts to finalise the review. The main outstanding issues are potential modifications to the 2018 budget to meet the programme's 2.5% of GDP deficit target, and adjusting household heating tariffs," Fitch informs. 

Revenue performance improved in 2Q18, but expenditure under-execution will probably be required to meet the deficit target.

The agency specifies that the freeze of residential gas prices was extended in July for one month and discussions on the tariff formula are ongoing, but will be complicated by political considerations, given the approaching heating season and elections due in 2019. 

Completing the review would allow the disbursement of the fourth IMF tranche (possibly USD 1.9 billion), boosting reserves and unlocking other multilateral and potentially market financing. 

Fitch does not expect further disbursements under the current IMF EFF beyond the fourth tranche, as the programme is scheduled to end in early 2019. 

But continuing engagement with the IMF and international partners will be important to sustain macroeconomic stability improvements, limit reform reversals, and secure access to official and market financing.