KIEV: Standard & Poor's cut on Friday Ukraine's long-term sovereign rating one notch to 'B' due to worries about its growing financing needs and failure to attract foreign currency.
"This downgrade reflects our opinion that Ukraine faces significant external financing needs in 2013 and beyond, and uncertain prospects for securing sufficient foreign currency," S&P said, adding it was also keeping a negative outlook.
Ukraine's government is likely to face higher borrowing costs next year due to change in global conditions or investor perceptions, S&P said.
The country needs to repay $3.5 billion to the IMF next year, and its external debt servicing will climb to 7 percent of government revenues, it said.
Earlier this week Moody's ratings agency downgraded its assessment of Ukraine's debt by one notch further into non-investment grade territory due to doubts about the government's ability to implement reforms, worries about liquidity and a weak macroeconomic outlook.
The IMF agreed in July 2010 a $15.3-billion credit line for Ukraine and has already disbursed $3.4 billion in two instalments, the last dating back to 2010.
It has however refused for two years to disburse any more money, saying the authorities have not carried out sufficient reform.
The IMF, which has postponed a mission to Ukraine from mid-December to January due a surprise resignation of the government, is likely to take issue with the country's domestic gas tariffs and inflexible exchange rate regime, S&P said.
"As a result, discussions with the IMF could extend well into 2013 and in our view any agreement may prove difficult to implement," S&P predicted.
The negative outlook may be revised to stable if the government secures funding quickly and sets the economy "on a more sustainable growth path," it said.
The economic problems represent a growing headache for President Viktor Yanukovych, already internationally isolated over the jailing of his main political rival Yulia Tymoshenko.
In a sign of the economy's precarious situation, Ukraine's Prime Minister Mykola Azarov and entire government resigned Monday.
Economists say that the government will inevitably have to again call on IMF loans to see it through 2013.
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