Fitch Ratings upgrades Ukraine to B- rating
Fitch Ratings upgraded Ukraine’s credit rating from CCC to B- on Nov. 11, describing Ukraine’s credit outlook as “stable” in its evaluation of long-term foreign and local currency issuer default ratings (IDRs).
The agency cited the easing of external financing pressures as being among its reasons for improving the rating, this being evident from a number of factors, including a $2 billion increase in Ukraine’s international reserves during the first 10 months of 2016, and a $1 billion loan payout from the International Monetary Fund in September.
Fitch also noted that Ukraine’s debt repayments to foreign creditors were manageable, and its macroeconomic policy framework as well as macroeconomic stability have shown improvement.
“Inflation is forecast to average 14.9 percent in 2016, down from 48.5 percent in 2015, but well above the 4.6 percent ‘B’ median,” its press service stated.
However, the agency also stated that general government debt was high, and forecast that it would increase from 67 percent of the GDP in 2015 to 74 percent in 2016.
And while the banking sector has stabilized, the agency remained critical. The sector is “weak, with low capitalisation levels and non-performing loans of over 50 percent,” and it poses a risk to economic stability and may restrict economic recovery, Fitch said.
The Finance Ministry hailed the upgrade as a positive sign for business, which would allow Ukraine to attain financial resources at “more favorable terms on the global markets”.
Finance Minister Oleksandr Danyliuk lauded the move, saying that investors followed such ratings closely.
“That is why we pay so much attention to our ratings, since investments are the basis of economic development, employment and prosperity,” Danyliuk said.
A CCC rating means there is substantial risk of a possible default, while a B rating indicates that while material default risk is present, there is a “limited margin of safety.”
Artem-Bank declared insolvent
The National Bank of Ukraine declared Artem-Bank insolvent on Nov. 15 after the commercial bank had problems servicing its loans.
Nonperforming loans accounted for 80 percent of the bank’s loan portfolio, which totalled Hr 385 million, resulting in a loss of its liquidity.
The NBU found that that the bank had failed to fulfil 2 percent or more of its liabilities to its clients and other creditors for five straight working days.
As of Nov. 8, the bank’s outstanding transactions amounted to more than Hr 20.2 million, or 5.3 percent of its liabilities.
Furthermore, the NBU’s press service reported that as of Oct. 1 “as a result of additional provisioning, the bank’s equity turned negative.” As of Oct. 25, the bank’s negative equity was Hr 185.2 million.
Consequently, this led to the bank’s failing to comply with prudential ratios and the limits of its open foreign exchange position, the NBU said.
The recapitalization program designed by the bank was deemed unsatisfactory by the NBU, and the bank was placed into temporary administration on Nov. 15.
Based on information obtained by the NBU, 94 percent (2, 411 people) of the bank’s depositors will be fully reimbursed.
The bank’s beneficial owners include Paradygma LLC (the beneficial owner being Borys Lemper, an Israeli citizen), Oleksandr Kachura with a 7.08 percent stake, and Artem State Joint-Stock Holding Company with a 0.83 percent stake.
Ukraine receives 200 million euro boost for transport
Ukraine’s transport system is set to get an upgrade with the help of a 200 million euro loan from the European Investment Bank (EIB).
As part of the project, new or upgraded trolleybuses, trams and buses will be rolled out across 20 Ukrainian cities, while public transport infrastructure, including tram and bus stations will be upgraded.
Ukrainian transport Minister Volodymyr Omelyan and EIB Vice-President Vazil Hodak signed an agreement on Nov. 11 to extend the loan to Ukraine as part of the bank’s Urban Public Transport Financing program.
The total cost of the project is expected to amount to 400 million euros, 50 percent of which will come from the EIB, with the rest of the funding to be contributed by the European Bank for Reconstruction and Development and local government budgets.
