Debt of Ukraine: dynamics, creditors, repayment of loans

2024 Author: Henry Conors | [email protected]. Last modified: 2024-02-12 02:43

Public debt is a set of debt obligations of the country to legal entities, individuals, other states, world organizations that provide loans and provide financial assistance. The public debt of Ukraine consists of several components:

• loans from the central government;
• loans from regional and local authorities;
• loans of joint groups with government investments.

In the latter case, the country must pay an amount commensurate with its percentage share in the capital of the corporation.

Debt Forms

Outstanding government loans are divided into two types by form:

1. External credits of the country. This includes all borrowed funds that were borrowed from foreign countries or international monetary organizations. These loans are included in Ukraine's gross external debt.
2. Domestic loans of the country. This form of debt includes money that was borrowed from owners of securities, shares or other creditors.

In general, Ukraine's debt was formed as a result of large financial loans, contracts and agreements for the issuance of credit funds and loans. This also includes old loans for which the state has asked for a deferral. Here we are talking about such concepts as the prolongation and restructuring of Ukraine's debt. Restructuring is an indulgence for the debtor, which is applied as an exception. Such a force majeure circumstance may be a difficult financial situation of the borrower, in relation to the country - a default.

2016 dynamics

Since 2012, Ukraine's debt has increased by $26 billion. Over the current year, the state has agreed with the International Monetary Fund for several more credit tranches.

The current financial policy of the state provides not so much the repayment of old debts as the possibility of taking on new ones. The goal is to borrow as much as possible. That is, in 2016, the government of Ukraine took out loans for a total of $10 billion, and repaid debts for only one and a half billion.

Former Prime Minister of Ukraine Arseniy Yatsenyuk said that during his work the state has learned to take the "right" loans and reduce the amount of debt. This conclusion was made as a result of the signing of the restructuring agreement. Most creditors agreed to this deal and partially canceled Ukraine's debts. As a result, the total amount of loans decreased from $73 billion to $66 billion. If we divide the total volume of loans by the entire population, then for each inhabitant of the country there are approximately twohalf a thousand dollars.

But even with some positive moments, Ukraine's debt is still growing. Thus, since 2014, due to the depreciation of the national currency, the public debt has increased by approximately one trillion hryvnia.

Yanukovych's loan

One of the loans not affected by the restructuring is Ukraine's debt to Russia. He remained the same and is 3 billion dollars. And this is only a fifth of the amount requested by Viktor Yanukovych back in 2013. Initially, the agreed amount was $15 billion.

Having been refused by the Russian Federation on a request to write off part of the debt, the country's government announced the suspension of its actions to repay this loan due to emergency circumstances. That is, the state has officially declared its financial insolvency.

Since the beginning of 2016, the Russian Federation has announced its intention to sue. But even though the creditor took more radical measures to return the money, the Cabinet of Ministers says that an agreement can be reached out of court proceedings. Now there is a dialogue on this issue at various levels, but Ukraine's debt to Russia remains outstanding.

Borrowers and lenders

Part of the state debt is bonds that were purchased by Oschadbank, Ukravtodor, CB Yuzhnoye, Ukrainian Railways. In general, the amount of transferredEurobonds is 16 billion dollars.

The country's creditors are mainly international financial organizations such as the World Bank, the International Monetary Fund, the EU, the European Bank. Two years ago, the government of Ukraine agreed on a four-year program, the essence of which is that the IMF will send loan tranches in exchange for some reform of the economy.

Repayment of loans

Experts in the field of economics unanimously declare that it is rather difficult to service a large number of loans. In the current situation, the state cannot exist without borrowed funds.

The actions to regulate the credit policy include the development of the economy, attracting foreign investment.

The critical level of debt is 60% of GDP. And this milestone was passed by the state a long time ago. All government actions this year will be aimed at making Ukraine's debt less than the critical percentage.