S -amp P raises Ukraine ratings on new-found stability

KIEV (AFP) - Standard and Poor's on Friday lifted Ukraine's debt ratings from a level deemed vulnerable to default, citing newly-found political stability after the formation of a government coalition.

Standard and Poor's said it was raising its foreign-currency sovereign credit rating on Ukraine to 'B-/C' from 'CCC+/C' and its local-currency sovereign credit rating to 'B/B' from 'B-/C' with a positive outlook.

The change came a day after supporters of new President Viktor Yanukovych succeeded in forming a ruling coalition and his close ally Mykola Azarov became prime minister.

The formation of the new government has raised hopes of an end to the chronic political instability in Ukraine from the last years, as Yanukovych now controls all the country's main decision-making centres.

"The once-high level of political risk in Ukraine has receded. In addition, Ukraine's prospects for external funding have improved," Standard and Poor's said in a statement.

One of Yanukovych's main priorities will be to resume talks with the International Monetary Fund (IMF), which has been withholding disbursement of the next tranche from a standby loan due to concerns over political stability.

So far the government has received a total of 10.6 billion dollars of the IMF's 16.4-billion-dollar credit extended in November 2008 to help Ukraine cope with its economic crisis.

"We believe that today's 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 IMF," said Standard and Poor's credit analyst Frank Gill.

He said the funding will be essential to improve confidence in Ukraine's monetary and economic stability.

"The resumption of cooperation with the IMF is without doubt one of the things that the government must do," Yanukovych was quoted as telling Azarov at a meeting Friday, adding it was a matter of urgency,

According to the Standard and Poor's website, an obligation rated CCC is "vulnerable to non-payment and dependent upon favorable conditions for the obliger to meet its... commitment on the obligation."

Ukraine was one of the countries worst hit by the global economic crisis and its woes were compounded by constant infighting between former president Viktor Yushchenko and his prime minister Yulia Tymoshenko.