In the second half of this year, the Ukrainian government must pay back more than $3 billion to external creditors. Next year, the amount to be paid back is about $7 billion. The Ukrainian government does not have the funds and the source for these funds are uncertain. A failure to meet these obligations would result into devaluation and increase in poverty.
There are three options how the government can meet its obligations:
- сontinuation of cooperation with the IMF;
- loans from private investors;
- a substantive reduction of the budget expenditures.
The option with private investors, in fact, means only postponing the problem for a year, with a higher debt in the future. The rate on private funds will be as high as 8% or perhaps even 10-12%.
Radical cuts of budget expenditures – pensions, wages, education, medicine, defense – are unlikely.
Therefore, there is one realistic option – the IMF program, with the annual loan rate of 3%. But this program will not be continued until Ukraine returns to the path of reform. With the IMF or without, Ukraine is at risk because of slow progress in reforms and eradication of corruption.
We have weeks (not months). The Parliament, the Government, and the President must make a choice now. Before the parliament goes in recess in mid July.
Tymofiy Mylovanov, PhD, Honorary President of Kyiv School of Economics, University of Pittsburgh
Yuriy Gorodnichenko, PhD, Chairman of the Kyiv School of Economics International Academic Board, University of California Berkeley
Yulia Klymenko, MBA Program Director, Kyiv School of Economics; Former Deputy Minister of Economic Development and Trade of Ukraine; Board member, Transparency International Ukraine
Roman Shpek, Сhairman of the Counsil of Independent Association of the Banks of Ukraine, Senior Andisor PJSC “Alfa Bank”
Tomas Fiala, Chief Executive Officer, Dragon Capital
Sergey Chernenko, Chairman of the Management Board of FUIB
Ivan Miklos, Chairman of the Strategic Advisory Group for Supporting Ukrainian Reforms
Margarita Karpenko, Partner, DLA Piper
Andriy Logvin, CEO and Co-Founder of Kasta
Sergiy Gusovskiy, Strategic Advisor to the Honorary President, Kyiv School of Economics
Nataliia Shapoval, Vice-president for policy research, Kyiv School of Economics
Nataliia Mostepaniuk, Vice-president for finance, Kyiv School of Economics