The end of 2014 turned out to be very difficult for Ukraine. In the broad masses and in the media, one could often hear that the country would simply not be able to pay its bills in the near future, and a default in Ukraine would be inevitable. Serious problems in the financial sector became preconditions for such a trend. Panic moods were formed due to a significant reduction in resources, thanks to which the state had to fulfill its obligations.
Facts
As of January 31, 2014, the country's external public debt amounted to 222.4 billion hryvnia, or 27.8 billion dollars. This figure corresponds to 38% of the total debt that the country guarantees, which is equal to 585.3 billion hryvnia, or 73.2 billion dollars. By the beginning of 2015, the state was obliged to pay about UAH 12.7 million, and this was only for external guaranteed debt. In accordance with the state budget, which its author Yatsenyuk himself calls far from ideal, in January there were payments in the amount of 6.03 billion hryvnia.exclusively for debt service. Only UAH 6.67 billion were paid off the principal amount of the debt.
What made the experts excited?
Disputes among experts about whether a default will take place in Ukraine or not, were caused by a sharp reduction in the volume of the country's gold and foreign exchange reserves, which is used to service external debts. We can talk about the reduction of assets in November 2014 compared to October by 20.82%. If we translate the figure into monetary format, then it will be 2.621 billion dollars. The Moodys agency, which employs 4,500 experts from 26 states, reacted negatively to this statement. It made a forecast of default in Ukraine, operating on the fact that over the past 10 years, the ZRV has reached its record low.
What does the government say?
Despite the fact that the probability of a default in the country is considered by many experts with a high degree of probability, the government has its own beliefs in this regard. The head of the National Bank of the country, Gontareva, says that the situation is under control, and the result of overspending is an attempt to maintain the national currency at the level of 8 hryvnias per 1 dollar and support for the military conflict in the east of the country. Unsuccessful repeated attempts to resolve the conflict, which ended in failure, became a prerequisite for the fall of Ukrainian Eurobonds. Despite the run-up of the budget adopted on December 29, 2014 and the actual situation, according to which the budget deficit amounted to UAH 63.67 billion,At the beginning of the year, the government actively said that there were enough funds for everything. However, only one fact of lack of money for servicing debts already speaks of a full-scale financial crisis. It will be possible to cope with the fulfillment of debt obligations only with the active support of external creditors.
What is a default?
Default in Ukraine can be seen as a kind of protective barrier that can protect the country from total economic bankruptcy. The mechanism of the procedure provides for the possibility for the borrower to repay the debt according to an optimized scheme. We can talk about debt restructuring, including deferral of payments, until the country gets out of the crisis. In general, the phenomenon will provide an opportunity to restore the internal economy of the state. As for the theoretical side of the issue, the mere mention of this term causes panic in society.
What phenomena are experts talking about in connection with the default in Ukraine?
If an official default in Ukraine is declared, mass lawsuits will begin to appear from the population and business representatives towards banks and guaranteed deposit funds, towards organizations from the banking sector that will try to manipulate the current situation. According to experts, the number of litigations between counterparties will increase as a result of the reduction of conscientious payers in the country. The consequences of the default for Ukraine assessvery problematic, since the difficulties in the banking sector of the state will leave an imprint on every branch of the state's activity and development.
Investment outflow only makes things worse
Vasily Yurchishin, an expert on macroeconomics, says that the situation in the country has been shaken by a rather large outflow of investments. The first thing that scares off foreign investors is the military conflict in the east. We can talk about rather low ratings of the country at the international level. The State Statistics Service reports that in the period from January to September, only 1.8 billion hryvnias were invested in the state economy. It was during this period that a decrease in the growth of foreign direct investment by 14.9% was observed. This is directly related to the devaluation of the hryvnia, which, according to official data provided by the National Bank of the country, amounted to 58.9%. The government reassures the population that the country is not without the support of America, China and the EU, tranches from which can solve all the problems of the state. Despite the current circumstances, almost no one dares to say that Ukraine is on the verge of default. Bets are being placed on the possibility of circumventing the phenomenon due to the strong support of partner countries.
What's in store for Ukraine in the future?
Experts, considering the question of whether there will be a default in Ukraine, find it difficult to give a categorical answer to it. The further development of the situation will depend solely on the decision of the world states in terms ofassistance. If the phenomenon takes place, although the country will get a chance to re-enter the world stage through a long rehabilitation, it will have to face certain difficulties. Studying the question of what a default means for Ukraine, we can talk about a fall in the international rating, therefore, a massive outflow of investor capital is inevitable. World countries will stop lending, financing will be available only at a high percentage and with collateral. The fall in the exchange rate, the fall in imports, the reduction in real incomes of the population, the growth of unemployment - this is just the main thing that experts do not stop talking about. A negative imprint will be imposed on the banking segment, in particular, many financial institutions will be closed, clients' accounts will be closed, and the process of lending to real sectors of the economy will become more difficult. There is a possibility that some banks and participants in the securities market will relieve themselves of all obligations, following the example of the state. An increase in unemployment is inevitable. Experts, soberly assessing the current situation, note the presence of the entire list of phenomena that are more and less pronounced in the country's economy today.
