OREANDA-NEWS. The implications for Ukraine's sovereign credit profile of the political crisis which saw two parties leave the governing coalition will depend on whether IMF disbursements are further delayed and official lenders' willingness to support Ukraine is weakened, Fitch Ratings says.

Tensions between President Petro Poroshenko and Prime Minister Arseniy Yatsenyuk, combined with the influence of vested interests and popular opposition, have already delayed reforms and held up the second review of the IMF's USD40bn, three-year Extended Fund Facility (EFF) programme. Yatsenyuk's government survived a no-confidence vote last week, but two parties - Batkivshchyna (Fatherland) and Samopomich (Self Reliance) - withdrew from the coalition, leaving it 11 seats short of a parliamentary majority.

The near-term political consequences are unclear. The leader of the Radical Party, which has 21 seats in parliament and left the coalition last September, said on Thursday he was willing to participate in forming a new coalition. Bloomberg reported on Monday that Batkivshchyna's leader, former Prime Minister Yulia Tymoshenko, had made a fresh call for Yatsenyuk's dismissal.

A minority government or fresh elections would add to the uncertainty around the Ukrainian authorities' capacity to pass reforms that are critical to keeping the IMF programme on track and to underpin macroeconomic stability. The first EFF review last August secured USD17.5bn following reforms including the floating the hryvnia, and liberalising the domestic gas market. But political reform and tackling corruption are proving challenging. Economy Minister Aivaras Abromavicius resigned on 3 February, saying his reform efforts were being obstructed.

International support from the IMF and other multilateral and bilateral lenders is an important support for Ukraine's sovereign rating, which we raised to 'CCC' from 'RD' last November after the country completed its private-sector debt restructuring. The official sector provided most fiscal financing in 2015 and will do so again this year. Official financing has boosted reserves, although these remain low.

It is possible that in the longer term political reconfiguration in Ukraine will produce a government more capable of reforming governance and fighting corruption. The IMF appears to remain engaged so far, with Managing Director Christine Lagarde stating earlier this month that she and President Poroshenko had "agreed on the principle of a roadmap of actions and priority measures," after warning that renewed reform efforts were needed for the programme to be successful.

Ukraine's low sovereign rating reflects continued weaknesses in the macroeconomic environment, public and external finances, and structural issues, including governance indicators.