KIEV, Oct. 19 - Following the cash-strapped former Soviet country's success in reaching a major debt write-off restructuring deal, Standard and Poor's today upgraded Ukraine's credit rating on Monday from "selective default."

The New York-based agency said it was raising Ukraine's foreign currency sovereign rating from 'SD' to 'B-/B' -- a grade defined as "highly speculative" but one that leaves the door open to future borrowing from abroad.
S&P downgraded Ukraine to selective default on September 25.

The war-riven country was then still going through excruciating negotiations with its commercial creditors aimed at easing its outsized debt burden and keeping an IMF-led life support package on track.

"The rating action follows the completion of Ukraine's distressed debt exchange on Oct. 14," S&P said in a statement.

"The raising of the ratings to 'B-' reflects the government's gradual implementation of reforms that support fiscal, financial, and economic stability, alongside improvement in some of Ukraine's external indicators, including its increasing international reserves."

Foreign cash injections have boosted Ukraine's gold and hard currencies' value to slightly more than $13 billion (11.5 billion euros) -- nearly double the low they had reached at the end of last year.

Yet the upgrade is not all good news for President Petro Poroshenko's austerity-driven government.

The rating is still classified as "junk" and puts the east European nation of about 40 million out of reach of most sovereign Western investment funds.

Poroshenko's government finds itself trapped between growing public discontent with the belt-tightening measures already enacted and the IMF's displeasure at Kiev's slow pace of tackling corruption and red tape.

The upgrade could temporarily lift investor spirits and add confidence to Poroshenko's party heading into Sunday regional elections in Kiev-controlled territories.

But Ukraine's inability to stamp out or strike a peace deal with pro-Russian insurgents in the separatist east have made both economic predictions and foreign investments an inexact and risky business.

Ukraine's US-born Finance Minister Natalie Jaresko admitted last week that the IMF will probably only issue one of the two $1.7-billion loans Kiev had hoped to receive by the end of the year.

A new IMF team will land in Kiev after the local elections to pore over Ukraine's books and recommend when to issue the next loan. (afp/ez)