S&P Downgrades Ukraine, Boosts Slovenia's Outlook

By Politics Dow Jones Newswires

Standard & Poor's Ratings Services lowered its credit rating for Ukraine, saying the nation could face an "inevitable" default in the coming months if it doesn't receive funds necessary to meet obligations.

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The firm now rates Ukraine's credit at triple-C-minus, down from its prior rating of triple-C and already well into junk territory. The outlook is negative, S&P added.

The downgrade comes as the International Monetary Fund earlier Friday praised Ukraine's efforts to reform and stabilize its economy, which is likely to contract by at least 7% this year. The country is suffering from its conflict with pro-Russian separatists backed by Russia.

The IMF has already handed to Ukraine $4.6 billion out of a total $17 billion it had agreed to lend, but the balance has been delayed by a protracted process to form a new government.

"In our view, this delay, coupled with significantly reduced foreign currency official reserves, increases the risk that the Ukrainian government might not be able to meet its obligations," S&P wrote Friday. "A default could become inevitable in the next few months if circumstances do not change; for instance, if additional international financial support is not forthcoming."

Elsewhere, S&P revised its outlook for Slovenia to stable from negative, citing more predictability in the nation's politics after the election of a new government that enjoys a "sizable parliamentary majority and mandate" to stabilize its financial system and public finances.

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The firm rates Slovenia's credit at A-, which is four notches into investment-grade territory.