Ukraine is a resource-rich country with a warm mild climate, developed industry and hard-working people. She began her journey without a public debt. Now you can only sympathize with what external debt of Ukraine has 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 the undertaking of debts of the former Soviet republics.
The starting point of the "credit history" of Ukraine can be considered July 15, 1992. On this day, the Verkhovna Rada legalized state guarantees for loans of Ukrainian enterprises, which many of them took advantage of. In total, $ 2 billion was raised in this way. Most of these funds were paid by Ukraine. The external debt of companies, now to the state, has not been repaid so far.
In 1993, the growth of public debt continued and reached the level 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 use. Using the gaps in the legislation, Ukraine actively "printed" electronic rubles, paying them for Russian goods. Such behavior was regarded as fraud by the Eastern neighbor, and these amounts were later issued as commodity credit.
Ukraine and international financial organizations
Since 1994, Ukraine has begun to look closely at international credit organizations. To borrow money there, it was necessary to strictly observe financial discipline. Uncontrolled cash emissions from the end of 1994 ceased. To replenish the budget, the National Bank is developing a program for issuing government bonds within Ukraine. Their features were short maturities and high interest rates.
Bonds in 1995 were sold in the amount of 300 million hryvnias, next year already by 1.5 billion. Naturally, such a policy led to difficulties in servicing the public debt. In 1995, Russia wrote off part of the debt in the amount of $ 1.1 billion and postpone the maturity of the remaining part to 1997, goes to a number of other concessions - in particular, it accepts payment for gas by government bonds.
The budget remained scarce in 1997. But it was not possible to attract the whole $ 1.145 billion abroad - the international financial institutions were not satisfied with the pace of the reforms being carried out in the country. The shortage was covered in the usual way - by issuing 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. Payment deadlines were delayed and interest on debt obligations was reduced.
For the Ukrainian economy, 1999 was the most difficult year in its history. Hryvnia devaluation, record low GDP and default fell on this year. By January 1, 2000, the public debt amounted to $ 12.5 billion, or 60% of GDP. The increase in the payment term and the positive dynamics of prices 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 hooked the Ukrainian economy. To overcome negative trends, the IMF agreed on a loan of $ 16.5 billion with a repayment term of 15 years. The gas conflict with Russia also dates back to this time, when the refusal to pay for consumed gas forced Gazprom to cut off fuel supplies. The crisis continued in 2009.
In the diagram showing Ukraine’s external debt by years, it is easy to see the rise in these 2 years. If in 2007 it amounted to $ 54 billion, then by the beginning of 2010 it had already grown to $ 103 billion. As a result of the crisis, the ratio of Ukraine’s external debt to GDP jumped sharply - from 55 to 85%.
From fall to fall
The economic downturn stopped in 2012, there was even some growth in the 2nd quarter. In the next 2 years, there was a decline in GDP by 1-2%. The economy was in a precarious balance, but the political upheavals of late 2013 - early 2014 caused its rapid decline.
A violent change of power in February 2014 led to unrest in eastern Ukraine. Russia has suspended the allocation of the 2nd tranche of a loan totaling $ 15 billion, agreed with the previous government. Ukraine, whose foreign debt to Gazprom has reached indecent sizes, has become compelled to purchase gas on a prepaid basis. From that moment, the opportunity to attract money from Russia was lost for Ukraine.
The new regime urgently needed external replenishment in connection with the secession of the Crimea and the war in the Donbass, a region whose contribution to the country's GDP reached 20%. Ukraine, whose external debt reached alarming proportions, could count on IMF assistance. Help was provided, but with a number of conditions.
The IMF's standard requirements for states that have fallen into a financial hole are budget cuts, higher tariffs for the population, and tough financial discipline.
