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Fitch Ratings has revised Ukraine's Outlooks to Stable from Negative. London, March 17 (Interfax) - Fitch Ratings has revised Ukraine's Outlooks to Stable from Negative, the ratings agency said in a press release.

Fitch has simultaneously affirmed Ukraine's Long-term foreign and local currency Issuer Default Ratings (IDRs) at 'B-' and Short-term foreign currency IDR at 'B'. Ukraine's Country Ceiling is affirmed at 'B-'.

"The passing of elections and formation of a government have lessened risks of a prolonged period of post-election policy uncertainty and further intensification of macroeconomic and financial instability," said David Heslam, Director in Fitch's Sovereign Group.

Ukraine's presidential elections have passed smoothly. A coalition government has been confirmed by parliament, following rule changes allowing the government to be confirmed by a majority of MPs, rather than a majority of political parties. Prime Minister Mykola Azarov has declared the government's priorities as passing a 2010 budget and resuming co-operation with international financial institutions (IFIs), including the IMF, which suspended financing in November 2009. The risk of an extended period of post-presidential election political uncertainty has therefore fallen significantly, lessening the likelihood that Ukraine's sovereign ratings will be downgraded further. Fitch has downgraded Ukraine's sovereign IDRs by three notches since October 2008.

The new government nevertheless faces a tough challenge to adjust policies, unlock financing from the IMF and tackle the ongoing impact of an economic and financial crisis that has hit Ukraine particularly hard. Fitch estimates real GDP to have contracted by 15% in 2009, among the worst performance of any rated sovereign. The general government deficit is estimated to have widened by over 5pp of GDP last year, to 8.5%, and could be higher once official IMF-based accounts are reported. In addition, the quasi-fiscal deficit of Naftogaz and bank recapitalisation costs will have added about 5% of GDP to the government's financing needs last year. Fitch estimates gross government debt at 23.1% of GDP in 2009 (13.8% in 2008). Including guarantees, government liabilities are estimated at 32.9% of GDP.