Fitch upgrades Ukraine's debt rating, outlook positive

President Volodymyr Zelensky, pictured in August 2019, has enjoyed a strong political mandate to pursue a reform agenda, Fitch said in its report

The ratings agency Fitch on Friday upgraded Ukraine's sovereign debt to "B" from "B-," pointing to the country's increasing political and economic stability as well as falling debt levels.

While the debt remains in highly speculative status, the outlook for Kiev is also "positive," the agency said, noting that President Volodymyr Zelensky enjoyed a strong political mandate to pursue a reform agenda.

Ukraine's new prime minister, Oleksiy Goncharuk, also intends to seek additional assistance from the International Monetary Fund, which could help make debt payments in the coming years, according to Fitch.

After a popular uprising ousted a Kremlin-backed regime in 2014, the new Ukrainian government secured a $17.5 billion deal led by the IMF to buttress the struggling economy.

But disbursement of the IMF funds had been frequently delayed under the government of former President Petro Poroshenko, which struggled to push through reforms required by the IMF.

Zelensky, who was a popular comedian before being elected in the spring, commands a parliamentary majority and took office on promises to tackle corruption.

Given the government's commitment to reforms and the outside help of bodies like the IMF, "Fitch expects further improvements in creditworthiness," the agency said in a statement.

"Fitch does not anticipate a near-term resolution nor a destabilizing escalation in the conflict in Eastern Ukraine with Russia."

Ukraine's economy should grow 3.4 percent this year, driven by strong domestic demand and wheat exports, the agency said.

Meanwhile, its external debts should fall to 47.9 percent of GDP by the end of this year, down almost 20 percentage points since 2016, according to Fitch, while the budget deficits are capped at three percent and should average 2.3 percent during 2020 and 2021.