Ukraine: external debt - financial hassle or way of living?

Ukraine is a resource-rich country with a warm mild climate, developed industry and hard-working people. She began her journey without having a public debt behind her. Now you can only sympathize with what external debt of Ukraine is accumulated by 2015.

The beginning of the way

Ukraine began its history as an independent state in 1991. Russia became the legal successor of the USSR, including it assumed obligations on the debts of the former Soviet republics.

The starting point for the "credit history" of Ukraine can be considered July 15, 1992. On this day, the Verkhovna Rada legalized state guarantees for loans to Ukrainian enterprises, than many of them used. In total, $ 2 billion was raised in this way. Most of these funds were paid by Ukraine. The external debt of companies, now already before the state, has not been repaid so far.

In 1993, the increase in the national debt continued and reached a mark of $ 3.6 billion. Ukraine received its first loans in Russia. The new states did not yet have their own currency and the Russian ruble was in motion. Using gaps in the legislation, Ukraine actively "printed" electronic rubles, paying them for Russian goods. Eastern neighbor, this behavior was regarded as fraud, and these amounts were later issued as a commodity loan.

Ukraine and international financial organizations

Since 1994, Ukraine has become an eye on international credit organizations. To borrow money there, it was necessary to strictly observe financial discipline. Uncontrolled money issue since the end of 1994 ceases. To replenish the budget, the National Bank is developing a program of issuing government bonds inside Ukraine. Their feature was short maturities and high interest rates.

Bonds in 1995 were sold for the amount of 300 million hryvnia, next year it was 1.5 billion. Naturally, such a policy led to difficulties in servicing the state debt. In 1995, Russia wrote off part of the debt in the amount of $ 1.1 billion and postpones the maturity of the remaining part for 1997, goes to a number of other indulgences - in particular, it accepts payment for gas by government bonds.

The budget remained deficit in 1997 as well. But it was not possible to attract $ 1.145 billion abroad - the international financial institutions did not suit the pace of reforms in the country. The shortage was covered by the usual way - the release of high-yield bonds. The hour of reckoning came in 1999. The state was not able to pay interest on bonds and went to review the terms of payments. Terms of payments have been postponed and interests on debt obligations have been reduced.

For the Ukrainian economy, 1999 was the most difficult year in its history. The devaluation of the hryvnia, a record low GDP and a default occurred this year. By January 1, 2000, the national debt was $ 12.5 billion, or 60% of GDP. The increase in the payment period and the positive price dynamics in the metallurgy and chemical industry provided Ukraine with economic growth until 2008. During this period, borrowed funds were practically not attracted, and the total debt gradually decreased.

Ukraine: external debt during the 2008 crisis

The global crisis painfully caught the Ukrainian economy. To overcome the negative trends with the IMF, a loan of $ 16.5 billion was agreed with a maturity of 15 years. By this time, the gas conflict with Russia also applies, when the refusal to pay for consumed gas forced Gazprom to cut off fuel supplies. The crisis continued in 2009.

On the diagram showing the external debt of Ukraine by years, it is easy to see the take-off that falls on these 2 years. If in 2007 it was $ 54 billion, then by early 2010 it had already grown to $ 103 billion. As a result of the crisis, the ratio of Ukraine's external debt to GDP sharply jumped from 55 to 85%.

From fall to fall

The economic decline stopped in 2012, in the second quarter there was even some growth. In the next 2 years there was a decrease in GDP by 1-2%. The economy was in shaky equilibrium, but the political upheavals of late 2013 - early 2014 caused its rapid decline.

The violent change of power in February 2014 led to unrest in the east of Ukraine. Russia suspended the allocation of the second tranche of the loan totaling $ 15 billion, agreed with the previous government. Ukraine, whose external debt to Gazprom has reached an indecent size, has become forced to purchase gas on an advance payment. From that moment, the opportunity to attract money from Russia was lost to Ukraine.

The new regime was in dire need of external recharge in connection with the separation of the Crimea and the war in the Donbass region, whose contribution to the country's GDP reached 20%. Ukraine, whose foreign debt has reached alarming proportions, could count on IMF assistance. Assistance was provided, but with a number of conditions.

The IMF's standard requirements for states that fall into the financial pit include a reduction in budget expenditures, an increase in tariffs for the population, and a strict financial discipline.

Forecasts and prospects

Economic problems and the decline in gold and foreign exchange reserves caused the devaluation of the hryvnia 3 times. Servicing of foreign debt denominated in US dollars has become an impossible task. The external debt of Ukraine, the payment schedule of which resembles a minefield, threatens at any time to lead the country to default. While it is kept afloat only more and more new loans.