Ukraine's national debt reaches 64% of its GDP Debt
Friday, 31 October 2014, 13:32
In September, Ukraine's debt increased by 6.9%. Loans from the IMF and from the World Bank as well as the ongoing recapitalization of "Naftogaz Ukraine" were the primary reasons for this increase. The situation with Ukraine's debt is indeed rather unpleasant, but not fatal.
In September, the national debt increased by 6.9% ($4.8 billion) and now stands at $ 74.3 bn. overall, an amount which is now more than $50,000 for a single worker. Moreover, Ukraine's debt has reached 64% of the nation's GDP.
Loans from the IMF ($1.4 billion) and from the World Bank ($ 0.5 million) and the ongoing recapitalization of "Naftogaz Ukraine" (25.9 billion USD) were the primary reasons for this increase in the level of the nation's debt in September.
In the coming months the rate of growth of public debt will slow down. In October, Ukraine paid back $ 1.6 billion of Naftogaz's debts. There will not be another recapitalization of Naftogaz this year. And the situation with acquiring new loans remains unclear for the time being. The IMF, for example, says it is unable to provide Ukraine with the next tranche of funds right now ($ 2.8 billion). Therefore, public debt is expected remain around 65% of GDP this year.
In fact, the situation with Ukraine's debt, which is sitting above the critical level of 60%, is indeed rather unpleasant, but not fatal. By and large, the situation with the currencies of our debt since the beginning of the year has not changed and really only increased relative to the GDP due to the devaluation of the hryvinia. If Ukraine did not have the support of international organizations, it would have been bankrupt. But as cooperation with the IMF continues until the government can somehow fulfill their commitments to it, Ukraine will just have cope with their debt. Just so long as Ukraine remains on friendly terms with the IMF, there is no real threat of it defaulting on its loans.
It is interesting to note that in terms of the hryvnia, public debt grew at a slower rate (only 1.7%). The primary reason for this was debt revaluation with a more favorable exchange rate. If during August the debt was calculated when the average exchange rate was 13.6 UAH / USD, in September the exchange rate was 12.95 UAH / USD, thus being more favorable.