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Published in Stream:
Ukraine Live Day 325
Press by
The Interpreter
Russian-to-English translation journal, with original analysis and commentary on Russia's foreign & domestic policy.
Ukraine Has a Serious Debt Problem, With No Solution In Sight
7 years
European Commission Offers Ukraine 1.8 Billion Euros, Says IMF Conditions Must Be Met
Ukrainian POW Facing Charges In Moscow Still On Hunger Strike

The Economist has published an analysis of Ukraine's economy. Prospects are dim to say the least. Despite the IMF (International Monetary Fund) bailout, Ukraine is facing a major crisis in 2015, and in many ways its efforts to combat 2014's crisis means that 2015's outlook is even more dim:

Ukraine’s foreign-exchange reserves are at about $9 billion, having been above $20 billion a few months ago. They fell in 2014 because the central bank tried to prop up the hryvnia. Ukraine has also cleared big debts with Russia for gas imports. But next year’s debt repayments and gas bills will probably send them into the red. The biggest payment comes in December, when Ukraine needs to repay a $3 billion bond to Russia.

Trouble may come sooner than that. Ukraine’s official state-finance statistics are released in March or April. According to a bizarre rule of the $3 billion Russian bond, Ukraine’s debt-to-GDP ratio cannot exceed 60%. If it does, the Kremlin can force Ukraine to pay back the bond immediately. Not only that: Ukraine would technically be in default of all its international bonds, meaning that other creditors could demand immediate repayment. Everyone suspects that Ukraine already has breached the 60% threshold; but that will only be known for sure when official figures are released.

The problem is compounded by the fact that the debt-to-GDP ratio has been getting worse since 2012, long before the Euromaidan protests, Russia's annexation of Crimea, or Russia's invasion of eastern Ukraine.

Since so many factors in Ukraine's economic crisis are external, and many of them predate the Euromaidan revolution, it's not clear what Ukraine's government can do to stop the bleeding. And it's also not entirely clear how any plans presented by external powers in either the West or in Moscow will make things better.

Of course, the Russian propaganda outlet Sputnik is running the following headline: Ukraine Heading for Default yet Looking to Beef up Defence Spending. Since evidence published just in the last few weeks indicates that Russia is still sending new weapons to Russian-backed rebels in the east, it's no surprise that the Kremlin's propaganda brigade is pushing for Ukrainian defense cuts.

Cartoonists, however, seem to have been able to spot the difficulty of the current situation before Western policy makers: