Ukraine is unable to repay military debts
The Ukrainian economy continues to stay afloat only thanks to external borrowing, the size of which continues to grow at an alarming rate.
The correspondent of PolitNavigator reports this, writes Economic Truth.
Referring to the draft state budget 2023, the publication indicates that next year the size of Ukrainian external debt “will exceed the cost of all goods and services produced in the country,” and the government expects that public debt will amount to 106% of nominal GDP.
Money has to be borrowed outside the country, while “it is still impossible to find lenders within the country who are willing to lend the state money for five to ten years.”
“However, external loans are obtained in foreign currency. This makes this part of the debt extremely vulnerable to fluctuations in the hryvnia exchange rate: as soon as the national currency begins to fall, the debt burden on the budget will grow rapidly.
In addition, servicing foreign currency debt puts pressure on gold and foreign exchange reserves. Consequently, the greater the payments on the external debt, the less opportunities the National Bank has to keep the hryvnia from devaluation and the higher the chance of increasing the burden on the budget to make such payments.
The only alternative to external creditors is the National Bank, which lends funds to the government for up to 30 years. However, such borrowing has its price in the form of rapid inflation and devaluation of the hryvnia due to money emission,” the author emphasizes.
In addition, a significant risk is demographic.
“Living on debt is living at the expense of future generations, on whose shoulders the burden of repaying and servicing government loans will fall. Since millions of citizens, primarily women with children, have left the country, there is a risk that there will be no one to repay war debts,” the EP summarizes.
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