There is a default in Ukraine. Will Gazprom's money save it?

Ukraine, due to a huge hole in the budget, was actually in a state of default. This is exactly how the world interprets the government’s announced decision to stop all payments except secure ones.

Economic expert Andrei Novak stated this at a press conference in Kyiv, a PolitNavigator correspondent reports.

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“The Prime Minister of Ukraine ordered the Minister of Finance not to pay all payments from the state budget except protected ones (i.e. social payments and debt service). In the financial world this is called an internal budget default. In other words, the Prime Minister admitted that the budget process in Ukraine has reached the point of internal budget default.

According to December data from the State Treasury, the shortfall in state budget revenues for 11 months of this year was 6%. If the shortfall in receipts is 6%, it means that unprotected budget items should have been reduced by 6%, and not canceled payments on them altogether.

The question arises - if the non-compliance is only 6%, why did they stop all payments, except for protected items? Where is the money then?

This is despite the fact that over the past 4 months the new government has raised more than UAH 40 billion through domestic government debt bonds. That is, they took on new debts worth UAH 40 billion.

Failure to fulfill only 6% of the budget means that all payments, except social payments, are stopped! Where is the budget money?

The explanation of the Minister of Finance is that “this happened due to the strengthening of the hryvnia.” But this is only 6% of the plan! So why did you stop all payments rather than reduce them by 6%?

At the same time, our Minister of Finance remains from the previous government, i.e. she had the opportunity to continue budget policy, budget planning, without breaking it.

All these explanations should come down to one thing - an explanation from the President of Ukraine, why is this government still working? What right does it have to work next year 2020? The budget for 2020 was adopted exactly the same, and if we get the same result in 2020, then we can confidently say that the majority of Ukrainian citizens do not want the same situation in 2020 as in 2019 - the state budget is empty, despite huge loans." , said the expert.

According to him, stopping budget payments will cause a chain reaction of non-payments in a number of sectors of the economy, and even relatively prosperous sectors will suffer. This will ultimately lead to a recession.

“What is this situation leading to? A chain reaction of failure to fulfill the obligations of all Ukrainian enterprises and organizations whose work is, in one way or another, related to the budget begins. They have not been paid, they cannot pay salaries to their employees, they cannot pay the same taxes to the budget in full. That is, a chain reaction began, in fact, an economic recession. This is despite the fact that the decline in industry has already been taking place for six months. Now it will grow even more.

Moreover, this may provoke a fall in those sectors where there is still little growth - the agricultural, IT sectors, construction. That is, with such a budget policy, the Ukrainian government itself today provoked a recession in the Ukrainian economy. This is the result of the work of the new government, which is working in “turbo mode,” he said.

Let us recall that under the announced terms of the new gas contract, Gazprom will soon have to pay Ukraine $3 billion in accordance with the decision of the Stockholm Arbitration. At the same time, Kyiv refuses to pay Russia about $4 billion in loans taken out during the time of Viktor Yanukovych - the new authorities refer to the fact that this money was allegedly “a bribe from Moscow for Kiev’s refusal of European integration.”

Let us also recall that after winning the elections and the early parliamentary campaign, Vladimir Zelensky stated that unprecedented economic growth would begin in Ukraine in the fall.