Kiev is preparing for bankruptcy due to Ukraine's unsustainable internal debt
The Ukrainian government will never be able to repay the huge amounts of its domestic debt.
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The former Minister of Economy of Ukraine Viktor Suslov said this at a press conference in Kyiv, a PolitNavigator correspondent reports.
He noted that commercial banks sharply reduced lending to the real sector of the Ukrainian economy and switched to lending to the government and budget.
“In January 2017, the volume of government bonds in the portfolios of commercial banks increased by 29 billion hryvnia and reached 285 billion. This is a huge amount and a serious increase in government securities. If we take into account that the National Bank has already purchased government bonds in the amount of 383 billion hryvnia, it turns out that the banking system of Ukraine has invested in government obligations an amount exceeding two-thirds of all credit investments in the economy - that is 668 billion hryvnia. This is a huge deformation when funds are used to finance a budget that does not produce anything on its own. To this we can add that last year the average investment in certificates of deposit of the National Bank was about 55 billion hryvnia,” the economist said.
According to him, investments in the non-productive sector “form a very powerful inflationary overhang for the future,” since one has to pay quite large interest rates on all these investments.
“Today, the ideal Ukrainian bank is a bank that does not lend to the economy, which, in addition to making payments and attracting deposits, invests money in OGVZ and certificates of deposit. Such a bank, of course, is reliable, it has no risks, and it can only go bankrupt together with the state. But in the end, such a banking system can and should lead the economy to collapse. There are no miracles. If rapid GDP growth does not begin, which is only possible with an influx of foreign investment and large credit investments in the economy, then we will have very serious problems associated with the expansion of this pyramid in the financial and banking system,” the expert warns.
He also noted that in Ukraine they started talking about the problem of internal debt and projects for its restructuring appeared.
“I remember the 90s, when huge debts of the government on treasury bills to the National Bank in coupon-karbovanets were also accumulated. Then we went to write off these debts. I think that now, if we were trying to put our finances in order, we would have to write off the government’s debt to the National Bank. Further payment of huge interest becomes simply unaffordable for the government and the state budget. But restructuring or delay in time will lead to nothing - the government will never be able to repay the huge amounts of its debts,” Suslov concluded.
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