The crisis in Ukraine continues to erode the country’s financial standing.
The ratings agency Standard & Poor’s cut Kyiv’s credit rating on Friday, saying: “The future of the current Ukrainian leadership is now more uncertain than at any time since the protests began last November”.
It is the second such downgrade in three weeks.
S&P analysts said the latest developments in the crisis make it less likely Ukraine would receive desperately needed Russian aid, thereby increasing the risk of default on its debts.
Moscow was due to buy $2 billion worth of Ukrainian government bonds, but that sale is on hold with Russia’s economy minister saying they are waiting for clarity on the government in Ukraine.
“The downgrade reflects our view that the political situation in Ukraine has deteriorated substantially. We believe that this raises uncertainty regarding the continued provision of Russian financial support over the course of 2014, and puts the government’s capability to meet debt service at increasing risk,” S&P said in a statement.
The downgrade came just ahead of Ukraine’s opposition leaders signing an EU-mediated peace deal with President Viktor Yanukovich aimed at ending the violent standoff in the country’s capital.
That news caused Ukraine’s dollar bonds and the hryvnia currency to firm against the dollar from record lows hit this week.
However, RBS analyst Tatyana Orlova noted the country was still in dire financial straits. “This is not the end of the story. What I am reading is there is a deal but the devil is in the detail… The urgent need is for a technocratic cabinet that could take steps to avert default,” Orlova said.