Ukraine on the brink of bankruptcy

Ukraine has a period to avoid bankruptcy – we read in the latest issue of the British weekly "The Economist". The debt of Kiev is so advanced that the creditors agreed to suspend the repayment of loans by the State.

The weekly notes that if payments were requested today, the debt would become the second largest state spending immediately after the defense, which amounts to nearly 60% of the state budget.

In June, Ukrainian Finance Minister Serhij Marchenko offered creditors a deal that would reduce the current debt value by 60%, but they replied that they considered 22% more reasonable.

The weekly estimates that if Ukraine fails to comply with its obligations, it will show a worrying deficiency of assurance of private investors in the engagement of the West, and in the long word this could mean a disaster for rebuilding the country and entail a forced truce with Russia.

Ukraine desperately needs fiscal space. At the end of the year, its debt-to-GDP ratio will be close to 94% – very much for an economy with specified a turbulent financial past and size. The amounts provided by allies are impressive, but they are in the form of artillery, tanks and peculiar funds, not cash. Only $8 billion from the last US package will go straight to the Ukrainian government, which is the equivalent of just over a 4th of Ukraine's yearly social benefits spending, even in the form of a loan. The EU plans to offer a small more, but inactive only US$38 billion over 3 years," writes The Economist.

The Economist besides writes that bond holders are increasingly sceptical of plans for the long-term reconstruction of Ukraine in the event of victory. Although the allies and IMF argued that restructuring would let Ukraine to reenter the financial markets as shortly as War It will end, and her allies will compose off debts, investors are not convinced that specified a day will always materialize.

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