LONDON - Any deal between Ukraine and the International Monetary Fund
would support its creditworthiness, ratings agency Fitch said on
Wednesday, but neither a failure of the deal or default by state energy
firm Naftogaz would immediately hit the rating.

Fitch director of emerging Europe sovereigns Andrew Colquhoun said his
main worries over Ukraine remained its external financing, the stability
of its banking sector and other macroeconomics stresses. "

An IMF deal would certainly be supported in that it would give them
additional reserves," he told Reuters in a telephone interview. "It will
be good for general creditworthiness but I wouldn't want to tie it to a
specific ratings decision. The absence of an IMF deal would not lead to
immediate ratings action."

A central bank official said on Wednesday Ukraine might seek support from
the IMF through a standby credit programme. Investors have dumped
Ukrainian assets since August on growing political and economic worries,
with the credit default swaps market almost pricing in default on its
debt.

Fitch cut Ukraine's sovereign outlook to negative in September on
deteriorating economic fundamentals and a rising risk of a currency
crisis. It is currently rated as BB-. "Ukraine's main problem has been an
overheating economy powered by credit boom so in some ways what is
happening is just what was needed," he said. "But there is a risk it could
be too abrupt a shock."

Ukraine made a sovereign guarantee in January it would cover $2.4 billion
in debt from state energy firm Naftogaz, which is already technically in
default on a $500 million Eurobond over its failure to provide audited
accounts with debt insurance markets again seeing outright default as
likely.

"In terms of Naftogaz, I wouldn't say a default there would lead to
immediate negative ratings action on Ukraine itself," Colquhoun said. "I
think they have enough in reserves to cover maybe $2-$3 billion in
Naftogaz debt."

He said political instability remained a worry, with the ruling coalition
having collapsed and elections imminent, but for now Ukraine was coping
well.
"Obviously, it will be better if Ukraine had a working coalition with a
strong consensus but on balance economic policy outcomes have not actually
been that bad, albeit with an imperfect process," he said. (Editing by Ron
Askew)