Announcements

    Drinks

      Scope completed a monitoring review of Ukraine
      FRIDAY, 18/11/2022 - Scope Ratings GmbH
      Download PDF

      Scope completed a monitoring review of Ukraine

      Monitoring review announcement

      Scope Ratings GmbH (Scope) monitors and reviews its credit ratings on an ongoing basis and at least annually, or every six months in the case of sovereigns, sub-sovereigns and supranational organisations.

      Scope performs monitoring reviews to determine whether material changes and/or changes in macroeconomic or financial-market conditions could have an impact on the credit ratings. Scope considers all available and relevant information when undertaking the monitoring review.

      Monitoring reviews are conducted by performing a peer comparison, benchmarking against the rating-change drivers, and/or reviewing the credit ratings’ performance over time, as deemed appropriate by the Lead Analyst or Analytical Team Head, in addition to an assessment of all aspects of the relevant methodology/ies, including key rating assumptions and model(s). Scope publicly announces the completion of each monitoring review on its website.

      Scope completed the monitoring review for Ukraine (long-term foreign-currency issuer and senior unsecured debt ratings: CC/Negative; long-term local-currency issuer and senior unsecured debt ratings: CCC/Negative; short-term foreign-currency issuer ratings: S-4/Negative; short-term local-currency issuer ratings: S-4/Stable) on 16 November 2022.

      This monitoring note does not constitute a credit rating action, nor does it indicate the likelihood that Scope will conduct a credit rating action in the short term. Information about the latest credit rating action connected with this monitoring note along with the associated ratings history can be found on www.scoperatings.com.

      Key rating factors

      For the updated Rating Report accompanying this review, click here.

      Ukraine’s long-term foreign- and local-currency ratings of CC/Negative and CCC/Negative, respectively, reflects multiple credit strengths. Firstly, they reflect significant international financial support, in the form of concessional loans and grants from a range of international multilateral and bilateral-official benefactors. Since the Russian Federation’s full-scale invasion of Ukraine in February and through October of 2022, official financing of Ukraine had exceeded USD 20bn; such sustained international financial assistance is crucial for curtailing demand for National Bank of Ukraine (NBU) monetary financing and ensuring long-run debt sustainability. Secondly, the preparedness and effective response of institutions to this historic geopolitical and economic crisis has been a credit strength: administrative and capital controls were swiftly adopted by NBU after escalation of the war, such as to preserve foreign-exchange reserves, avoid deposit flight and inject liquidity. To counter price pressures and boost attractiveness of hryvnia assets, the central bank as well hiked the policy rate by 15pps to 25%. Thirdly, enhancement of macroeconomic policy frameworks and strengthened economic stability since a 2014-15 economic crisis reflects a credit strength.

      However, Ukraine’s credit ratings are challenged by: i) long-run debt sustainability risk and likelihood of further debt relief being required, including possibility for further private-sector participation; ii) a recent record of sovereign restructuring; iii) weakened external-sector resilience, with a weakened level of international reserves, despite recent stabilisation, only moderately covering outstanding short-term external debt, alongside substantive dollarisation; and iv) banking-system vulnerabilities.

      The Negative Outlook represents Scope’s opinion that risks to the long-term sovereign ratings are skewed to the downside.

      The ratings/Outlooks could be upgraded if, individually or collectively: i) the government’s debt-sustainability outlook meaningfully improved and/or likelihood of further debt restructuring were to decline; ii) external-sector dynamics are re-anchored, via the stabilisation of foreign-currency reserves, shoring up of hryvnia and/or reestablishment of international market access; iii) the conflict were to reach a ceasefire, significantly reducing underlying challenging factors that impair the credit outlook; and/or iv) banking-system risks eased.

      Conversely, the ratings/Outlooks could be downgraded in case: i) the likelihood were to increase for further debt restructuring or non-payment of obligations, resulting in the failure to service coupon or principal on an original due date and/or on less-favourable terms for a debt obligation as compared with original contractual terms.

      The methodology applicable for the reviewed rating(s) and/or rating Outlook(s) (Sovereign Ratings Methodology, 27 September 2022) is available on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
      This monitoring note is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0.
      Lead analyst: Dennis Shen, Director.

      © 2022 Scope SE & Co. KGaA and all its subsidiaries including Scope Ratings GmbH, Scope Ratings UK Limited, Scope Analysis GmbH, Scope Investor Services GmbH, and Scope ESG Analysis GmbH (collectively, Scope). All rights reserved. The information and data supporting Scope’s ratings, rating reports, rating opinions and related research and credit opinions originate from sources Scope considers to be reliable and accurate. Scope does not, however, independently verify the reliability and accuracy of the information and data. Scope’s ratings, rating reports, rating opinions, or related research and credit opinions are provided ‘as is’ without any representation or warranty of any kind. In no circumstance shall Scope or its directors, officers, employees and other representatives be liable to any party for any direct, indirect, incidental or other damages, expenses of any kind, or losses arising from any use of Scope’s ratings, rating reports, rating opinions, related research or credit opinions. Ratings and other related credit opinions issued by Scope are, and have to be viewed by any party as, opinions on relative credit risk and not a statement of fact or recommendation to purchase, hold or sell securities. Past performance does not necessarily predict future results. Any report issued by Scope is not a prospectus or similar document related to a debt security or issuing entity. Scope issues credit ratings and related research and opinions with the understanding and expectation that parties using them will assess independently the suitability of each security for investment or transaction purposes. Scope’s credit ratings address relative credit risk, they do not address other risks such as market, liquidity, legal, or volatility. The information and data included herein is protected by copyright and other laws. To reproduce, transmit, transfer, disseminate, translate, resell, or store for subsequent use for any such purpose the information and data contained herein, contact Scope Ratings GmbH at Lennéstraße 5, D-10785 Berlin.

      Related news

      Show all
      South Africa BB+ ratings constrained by high debt burden, moderate growth potential

      29/11/2022 Research

      South Africa BB+ ratings constrained by high debt burden, ...

      Scope takes no action on the People’s Republic of China

      25/11/2022 Monitoring note

      Scope takes no action on the People’s Republic of China

      Scope affirms the Netherlands' credit ratings at AAA with Stable
Outlook

      25/11/2022 Rating announcement

      Scope affirms the Netherlands' credit ratings at AAA with ...

      Scope has completed a monitoring review for the Council of Europe Development Bank

      25/11/2022 Monitoring note

      Scope has completed a monitoring review for the Council of ...

      Scope affirms United Kingdom’s credit ratings at AA with a Stable Outlook

      25/11/2022 Rating announcement

      Scope affirms United Kingdom’s credit ratings at AA with a ...

      Scope affirms Estonia's credit rating at AA- with a Stable Outlook

      25/11/2022 Rating announcement

      Scope affirms Estonia's credit rating at AA- with a Stable ...