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19 August 2017
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Ukraine`s sovereign ratings affirmed at `BB-` - S&P

Reflecting fiscal concerns

Standard & Poor`s Ratings Services said it has affirmed its `BB-` long-term foreign, `BB` long-term local, and `B` short-term sovereign credit ratings on Ukraine, reflecting fiscal concerns arising from a shortened electoral cycle with a negative outlook, according to Interactive investor.

Although political risks in Ukraine have subsided in the near-term, the shortening of the electoral cycle continues to interfere with budgetary discipline, the privatization process, and the implementation of critical structural reforms -- in particular an overdue tightening of banking supervision, S&P said.

The rating agency added that given Ukraine`s high vulnerability to commodity prices, they continue to be concerned by the ongoing deterioration in the country`s non-metals trade deficit.

Aggressive external leveraging by the financial sector has fuelled the rapid growth of domestic credit, much of it foreign-currency linked, resulting in the increased unhedged liability of households and corporates, S&P said.

S&P said the frequent resorting to arrears-based funding by the general government (and the broader public sector) tends to reinforce Ukraine`s poor credit culture, and undermine its already weak institutions.

The ratings continue to be supported by Ukraine`s low general government debt, and by its recent strong record in attracting foreign direct investment which underpin the country`s long-term growth prospects, which remain among the best in the region, S&P said.

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