Fitch Ratings, an international credit rating agency, has affirmed Kyiv's Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) at 'B-'.\r\nFitch Ratings announced this in a statement, Ukrainian News Agency reports.\r\nThe international credit rating agency has also affirmed Kyiv's National Long-Term Rating at 'BBB(ukr)'.\r\nThe Outlook for the ratings is Stable.\r\nThe affirmation reflects Fitch's unchanged base case scenario regarding the city's adequate budgetary performance, albeit prone to volatility due to ongoing budgetary and tax reforms and a weak institutional framework for subnationals in Ukraine.\r\nThe statement reads that the ratings also factor in reduced direct debt following the debt restructuring, but still high contingent liabilities\r\nFitch expects Kyiv's financial performance to remain fragile over the medium term due to overall weakness of sovereign public finances and unpredictable fiscal changes amid continued uncertainty over macroeconomic stability.\r\n"In 2015-2016 the city recorded a surplus at above 10% of total revenue and an operating balance at about 40% of operating revenue. This materially exceeds the average deficit of 2% and operating balance of 16% in 2012-2014 due to significant changes in fiscal regulation in Ukraine. The higher performance in 2015-2016 was supported by new revenue sources allocated to the city and gradual increases in major tax rates," reads the statement.\r\nIn the opinion of the international credit rating agency Kyiv's contingent risk remains material, stemming from liabilities of the city's utility PSEs, which have accumulated payables to suppliers in 2014-2016.\r\n"The city has issued several guarantees to support projects in transport and housing sector. Most of the loans are euro-denominated, exposing the city to forex risk," reads the statement.\r\nThe statement reads that the city benefits from its capital status, and remains one of the wealthiest cities in the country, which historically accounts for more than 20% of the country's GDP.\r\nNevertheless, Ukraine's wealth metrics remain low by international standards (GDP per capita was USD 2,123 in 2015). This leads the rating agency to assess the local economy as weak, constraining the city's ratings.\r\nThe statement reads that Ukraine's economy demonstrated mild restoration in 2016. Fitch estimates Ukraine's GDP grew 1.1% year over year in 2016 (2015: 9.9% contraction) and expects 2.5%-3.0% growth in 2017-2018.\r\nFitch Ratings has affirmed Kharkiv's Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) at 'B-' and Short-Term Foreign-Currency IDR of Kharkiv at 'B'.\r\nFitch Ratings has also upgraded the city's National Long-Term rating to 'AA-(ukr)' from 'A+(ukr)'.\r\nThe Outlook for the ratings is Stable.\r\nThe statement reads that the affirmation of Long-Term Foreign- and Local-Currency IDRs reflects Fitch's unchanged expectation for the city's satisfactory budgetary performance and zero direct debt over the medium term as well as uncertainty of future growth prospect due to unpredictable fiscal changes and the overall weakness of sovereign public finances in Ukraine.\r\n"The upgrade of the National Long-Term rating reflects the city's recent consolidation in operating performance and better metrics compared with national peers," reads the statement.\r\nKharkiv's ratings remain constrained by Ukraine's sovereign ratings (B-\/Stable\/B) and a weak institutional framework governing Ukrainian local and regional governments\r\n"The framework is characterized by political tensions and challenging reform agenda implied by the Ukraine's IMF programme to secure additional external funding. This has resulted in frequent changes in both the allocation of revenue sources and the assignment of expenditure responsibilities, which limits forecasting ability and hinders strategic planning of local and regional governments in Ukraine," reads the statement.\r\nThe international credit rating agency expects Kharkiv's financial performance to remain satisfactory albeit fragile over the medium term due to continued reform of financial decentralization resulting in numerous amendments of budget and tax regulations in Ukraine.\r\nFitch forecasts that the city's operating margin will remain above 15% (2016: 24%) and the city will post a moderate deficit before debt at 2% of total revenue in 2017-2019 (2016: surplus at 1.5% ).\r\nAs Ukrainian News Agency earlier reported, in November 2016, Fitch upgraded the ratings of Kyiv and Kharkiv from CC to B-.\r\nFitch has affirmed Kharkiv's Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) at 'B-' and Short-Term Foreign-Currency IDR of Kharkiv at 'B'.