Standard & Poor’s hikes Ukraine’s credit rating a notch after new government was formed

S&P raises Ukraine’s credit rating

KIEV, Ukraine — Ratings agency Standard & Poor’s has increased Ukraine’s sovereign credit rating by one notch, saying reduced political risks after an election will help it raise money and access bailout loans.

Ukraine’s parliament voted Thursday to appoint a new prime minister, Mykola Azarov, who is a staunch ally of new President Viktor Yanukovych. Later in the day, S&P said in a statement that it had raised Ukraine’s foreign currency sovereign credit rating by to B-/C from CCC+/C.

S&P credit analyst Frank Gill said the formation of a new governing coalition and cabinet in Ukraine “has paved the way for better policy coordination and a renewal of relations with the International Monetary Fund.”

Ukraine was granted a $16.4 billion bailout loan by the IMF last year. In October, the fund halted the fourth and final portion of the loan, worth $3.8 billion, demanding that the country’s leadership resolve its budget crisis. Ukraine negotiated the payout of $2 billion in December, but $1.8 billion remains frozen.

Ukraine faced a political deadlock in the past few years due to a power struggle between former President Viktor Yushchenko and Prime Minister Yulia Tymoshenko.

S&P also issued a positive outlook on Ukraine’s rating, which means it is likely to be raised further in the short term. The agency said it expects the new government to draft and submit the country’s 2010 budget to the parliament by April 11.

Ukraine is one of the major casualties of the global downturn in Europe. Its gross domestic product fell 15 percent in 2009.

Vasyl Yurchishyn, analyst at Kiev-based Razumkov think tank, said politics have hampered Ukraine’s finances, which kept Ukraine’s raiting low. “Over the past couple of years power has not been consolidated, which did not allow to carry out consistent policies,” he said.

Yurchishyn warned, however, that risks still remain in Ukraine’s economy despite recent upbeat statistics — such as a 7.5 percent rise in GDP in January.

AP Business Writer Nataliya Vasilyeva contributed to this report from Moscow.