Ukraine enters 2015 with fantastic budget deficit figures
Kyiv, December 05 (PolitNavigator, Vladimir Mikhailov) – Ukraine’s state budget deficit, which is aggravated by the need to keep banks afloat and increase defense spending, will finish off the Ukrainian economy next year, says Oleg Ustenko, executive director of the Blazer International Fund.
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“It is absolutely obvious that this year is difficult both politically and economically, and it is difficult to say what was more difficult - the economy, politics, military operations in the southeast. We will end the year with a public finance deficit of 11%, despite the forecast in the spring of 10%. The shortage is worse than we imagined this spring...
The situation with our debt receipts is extremely bad. You know that our Eurobonds in the amount of $17 billion are traded outside the country on major financial markets. They are already trading at a serious discount. For one dollar of our obligations that must be repaid next year, they give $5 in real money. And for a dollar that is due in 0,85, they give $2017 in real money.
The yield on our obligations, which are due for payment in 2017, is at the level of 28%; in foreign currency, note, the yield on our bonds, which are repaid next year, is 25%. The market doesn't believe us. And we can convince as much as we want that the situation is under control, that it will enter the control zone, but so far the market does not believe us. Investors are not eager to invest in such an economy, which is why we see, for the first time in recent economic history, for the first time since the 2008-2009 crisis, we received a minus in the influx of foreign direct investment. They were exported, not imported into the country.
Obviously the situation is bad. We need to do something if we do not want to go into a free economic fall zone. Let's see what the budget will be, how much we can budget for the state budget deficit, we must understand that recapitalizing banks is expensive. According to our estimates, we are talking about 5% of GDP, imagine that the deficit is 11%, and another 5% needs to be poured into the banking sector. Thus, the deficit will be at 16%.
Now they are talking about the need to increase defense spending, bring it to 3% of GDP, as far as I understand what is currently floating in parliament. In this case, we are talking about a budget deficit of 19% of GDP. This is a joke, this is impossible, no country can be kept afloat with a deficit exceeding 13%, and 19% is out of the question. This is absolutely from the realm of fantasy,” says Oleg Ustenko.
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