“Fitch affirmed the sovereign nation's long-term foreign issuer default rating and country ceiling at B, which is five notches into junk grade,” WSJ reports. “Ukraine needs International Monetary Fund funding to repay over $9 billion in foreign debt this year, more than half of it to the Washington-based lender. An earlier loan program with the IMF was frozen in 2011 due to Ukraine's unwillingness to raise household gas tariffs, a key demand of the fund.”
READ ALSO: The Government Hushes Up a Crisis
According to Fitch quoted by WSJ, such a large external financing requirement makes the country vulnerable to adverse shifts in international capital markets. Ukraine might strike a new deal with the IMF, but Fitch no longer expects that to happen this year.
The rating agency also noted Ukraine's wide current account deficit of 8% of gross domestic product and the authorities' limited scope to resist any renewed pressure on the currency, which raises risks of a sharp exchange rate depreciation.
READ ALSO: Bank Reserves Diminishing
Ukraine's weak business environment and governance indicators constrain the country's ability to fully exploit its economic potential, while its relatively large and still-distressed financial system remains fragile, Fitch comments for WSJ.
