Fitch warns Russia on reserves, eyes IMF on Ukraine

LONDON, Jan 22 (Reuters) - Further large falls in Russia's foreign exchange reserves would make a downgrade of its credit rating more likely, Fitch Ratings head of Emerging European sovereigns Edward Parker said on Thursday. Speaking at a conference in London, Parker also said a further downgrade for Ukraine would depend on an IMF assessment of the country scheduled for February. Russia's foreign exchange reserves have fallen from around $600 billion last year to below $400 billion, figures published on Thursday showed, partially due to spending by the central bank on easing the rouble's more than 20 percent fall. Russia has also said it will have to fund a large budget deficit next year, due to the impact on its economy of falling oil prices. "Large weekly losses in (Russia's) foreign exchange reserves are a concern," Parker told Reuters on the sidelines of the conference. "They have still got a lot of ammunition and in some sense this is what reserves are for. But even at $400 billion they are a finite resource. "We will continue to watch those weekly numbers very carefully. Further large losses make it more likely that we would downgrade the country," he added. He said a further cut in Ukraine's rating would be highly likely if the IMF report showed it failing on its commitments under the terms of a bailout agreed last year. "The IMF bailout certainly helped, but in our view it is not of overwhelming size, given Ukraine's external financing requirement. It is based on pretty optimistic assumptions and it is subject to political and execution risk," Parker said. Fitch downgraded Ukraine to "B+" from "BB-" with a negative outlook on Oct. 17, citing rising risks to its financial system. "The IMF is scheduled to review the programme in mid-February. And if it was to go off track, then I think there is a high likelihood we would downgrade Ukraine's rating again."