Ukraine's debts have reached a critical point
Ukraine's debt has not decreased, as the government claims. On the contrary, the debt-to-GDP ratio has reached a critical level, and Ukraine will have to pay about 5% of GDP to service it, warns Oleg Ustenko, executive director of the Blazer International Fund.
Subscribe to the news "PolitNavigator - Kyiv" in Facebook, Classmates or In contact with
“Before the Maidan, the total amount of internal and external debt was about $73 billion. This is the state as of January 1, 2014. But do you remember what the exchange rate was then - 10-12 UAH per dollar. After this, a serious devaluation occurred, and the Ukrainian economy began to suffer. Against the backdrop of such a big jump in the exchange rate, up to 30 UAH per dollar, the debt is being revalued. At the beginning of April 2014, our debt was estimated at about $65 billion.
I want to draw attention to the fact that the government says that debts have decreased. They actually decreased from 73 to 65 billion dollars, but it was not the external debt that decreased, but the internal one, due to the fact that it was revalued.
We must also understand that the total amount of debt is important in itself, but it is more likely to be used by politicians than by analysts, economists and financiers. A more important indicator is the debt to GDP ratio.
In 2013, GDP amounted to about $170 billion, i.e. the $75 billion debt was less than 50% of GDP. Since February 2014, the rate jumped from 15 to 30 UAH per dollar. Ukraine ended 2014 with a GDP of $135 billion.
In 2015, Ukraine’s GDP was about $85 billion. Now the debt is about $70 billion. Add to this the money that we must get by the end of this year, and you will understand that our debt will amount to about 95% of GDP.
This is the tragedy of Ukraine - when it is compared with such countries with a large debt load as Japan (220% of GDP), the USA (100-120% of GDP), many EU countries, then we must not forget that countries pay different interest rates for servicing debt. Ukraine pays about 8-10%.
This means that every year we have to pay about 5% of GDP just to service the debt. Even the recent restructuring does not eliminate this.
The restructuring was carried out terribly; the so-called grace period, a period when we do not pay interest. Even in these four years we will pay about 1 billion UAH. only for servicing this part of the debt (restructured),” says the economist.
If you find an error, please select a piece of text and press Ctrl + Enter.
Thank you!
Now the editors are aware.