Mid-February, Prime Minister Arseniy Yatsenyuk survived a vote of non-confidence. However, the political challenge remains important, not only as the President seems keen to remove his Prime Minister, but also as two parties (Samopomich and Batkivschyna) decided to leave the ruling coalition. As a result, the government does no longer control the parliament. It comes in a challenging time as on 10 February the IMF warned that ‘without a substantial new effort to invigorate governance reforms and fight corruption, it is hard to see how the IMF-supported programme can continue and be successful.’ The comment came after the resignation of Economy Minister Aivaras Abromavicius who claimed that he was not able to pursue reforms due to political interference. In the meantime, violence in eastern Ukraine intensified again. The implementation of the Minsk Agreement concluded in February 2015 is still not completed, both sides accusing the other of breaching the Minsk deal. On the positive side, Ukraine accepted the Russian proposal to lift reciprocal transit bans on road cargo which was put in place by both sides in the beginning of February.

Impact on country risk

Ukraine’s economic situation remains extremely difficult. Financial support is badly needed. However, the country largely depends on the IMF-supported programme. Hence, it is of key importance for the government to invigorate governance reforms and fight corruption as required by the IMF. Yet it is hard to see how the government will proceed with the reform process in the environment of political distrust. Early parliamentary elections cannot be ruled out. In the meantime, capital controls remain in place, currency depreciation continues, liquidity remains poor. In this context, Credendo Group remains off cover. Prospects to reopen largely depend on the evolution of the liquidity and the improvement of the relation with the IMF.


Analyst: Pascaline della Faille, p.dellafaille@credendogroup.com