Yatsenyuk’s Cabinet not to pay national debt, let others pay in future
For Ukraine, it is just a respite, but not a solution
Prime Minister Arseniy Yatsenyuk and Minister of Finance Natalia Yares’ko announced about achievement of agreement with international creditors committee concerning partial debt relief on the Cabinet’s session on Thursday, 27th of August. Conditions of this agreement were unanimously adopted by the Government officials, and the PM did not conceal his satisfaction of this long-awaited event.
Fairly speaking, the high tide of economic and financial crisis in Ukraine still lasts. Real GDP decline from January to June drew up 14.1%, with 35.3% drop in building, 29.4% in extracting, 25.6% in processing industry, and 4.8% in agriculture. In July, inflation index composed 99%, which demonstrated state of deflation.
In these uneasy conditions, Yares’ko announced that 20% of total debt is to be relieved – near $ 3.6 – 3.8 billion. This will decline national debt from $ 19.3 billion to $ 15.5 billion. On the other hand, interest rate per year will increase from 7.22% to 7.75%, which is rather perceptible rise. Under the agreement, debt recovery will be delayed for four years – to 2019-2027, so Ukraine has a short break and still must pay increased interest rates.
But the main point is, who will have to pay? Current situation is critical because of well-known reason. Our economy is being intentionally ruined. Taking into account chronic budget deficit, we are living in expense of international credits. How to solve this situation, the Government have not still offered.
Five month ago, Yares’ko insisted on restructuring of 40% of debt. After her arguments, only then Ukraine might avoid default. Now international creditors agreed about relief half as much as it had been asked for. In such moments, analogy about a man going to sink may be drawn. He may seize an empty plastic bottle and win some time to appreciate situation or make decision. Such state we have not only with the debt, but with national economy in total, without any perspectives of improvement.
I suppose, the main victory for the current Cabinet is that there is no need to repay the debt before local elections in October. However, nobody knows which is going to happen in four years. Most likely, completely different ministers will have to puzzle over the national debt refunding.
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