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Sunday, February 18, 2018

Kiev drove the Ukrainians in hard bondage from foreign creditors


Ukraine continues to be mired in credit bondage. External public debt last year rose again. All the talk about its decline – nothing more than lies and manipulation. In terms of country residents commitments each working Ukrainian for 2016 rose by 20.5 thousand hryvnia – almost 117 thousand. As the growing debts of the state and why without the help of ordinary Ukrainians to Kiev can’t cope?

Just in November the Ministry of Finance of Ukraine said that the country’s public debt declined by 1.2% – up to 67,54 billion. However, the comparison was with the early November. If to sum up the year, it becomes clear that in fact the country’s debt continues to grow and to delight in absolutely no.

“The last message of the Ministry of Finance of Ukraine that Ukraine’s public debt decreased, is the usual lies of power, which is used to twist the facts”

Public and publicly guaranteed debt of Ukraine by the end of 2016 increased by 300 billion, or 11.1 billion to $ 71 billion, and accounted for about 82% of GDP, says the report of the analytical group Case Ukraine, published on the social network Facebook.

Significant increase in debt gave a loan to the IMF to $ 1 billion, as well as placement of Eurobonds for $ 1 billion. Americans are generous only on these small handouts, otherwise the debt would have grown a lot more essential. However, public debt is growing not only thanks to loans from the IMF and other international organizations. More than a third of the growth of the debt brought the capitalization of PrivatBank, after its nationalization, the report said.

In the end, considered the experts of Case Ukraine, the obligations of each working Ukrainian for 2016 increased by 20.5 thousand hryvnia – 116,7 thousand hryvnias, including at the art Bank, this amount accounts for 6.6 thousand hryvnia. For comparison, the average salary in Ukraine in November 2016 is 5.4 thousand hryvnias. That is, the amount of debt equal to almost two years ‘ wages of ordinary Ukrainians.

The government rescued on the verge of bankruptcy of the largest commercial Bank in the country, owned by oligarch Igor Kolomoisky. On the one hand, the state had no choice – bankruptcy of such a major Bank would collapse the entire financial system of the country. On the other hand, the national Bank of Ukraine a few years, pretended that does not notice the problems accumulated in the Bank. While the Bank bailout two years ago cost at least is much less for ordinary Ukrainians amount.

Some believe that PrivatBank has got the state due to the deterioration of relations Igor Kolomoisky and Petr Poroshenko. Others see this as a theft of funds by a Ukrainian oligarch with tacit approval from the top. The story is dark and corrupt, even as many actions of the national Bank of Ukraine to clean up the banking market from the allegedly unscrupulous banks.

In fact, the last message of the Ministry of Finance of Ukraine that Ukraine’s public debt decreased, is the usual lies of power, which is used to twist the facts, explains the Ukrainian economist Oleksandr Okhrimenko. And this is confirmed not only by the group analysis of Case Ukraine, but the statistics posted on the website of the Ministry of Finance of Ukraine. According to her, on December 1, 2016, the internal debt of Ukraine amounts to 560 billion (of 20.72 billion). To the Maidan (31 December 2013) internal debt of Ukraine was two times smaller – 284 billion.

Foreign debt on December 1, is 45.7 billion. For comparison: prior to independence, the external debt amounted to 37.6 billion dollars.

Where are the cries about the decline in the external debt of Ukraine, attributed as a victory for the head of the NBU, the country’s President, Petro Poroshenko? Often the concept of external debt is just replaced by the term “gross external debt”. If you look at the statistics of the gross external debt over the past two years he has really reduced: January 1, 2015 by 11% to 126,3 billion at the beginning of 2016 and by another 6% in the first quarter of 2016 by 1.2%. However, gross external debt includes the amount of external debt and private external debt, i.e. the debt of commercial banks and companies to foreign creditors.

In the end, gross external debt is declining, but only due to the fact that private companies reduce their debts. While public external debt continues to grow – from 37.6 billion to Maidan to 45.7 billion at the end of 2016.

Both of these multi-directional process just reveal serious problems in the Ukrainian economy. What is external debt of private companies in decline is bad. This means, first, capital flight, and secondly- they can’t take out new loans for their development. Part of private companies winding down its operations, goes bankrupt, the other part just don’t give a loan, given that the ratings of many companies garbage, like Ukraine itself.

The growth of public external debt means increased debt bondage of the West. Recently, the IMF has calculated that Ukraine in the coming years will have to find annually at 4 to 9 billion dollars to repay foreign debts (the state). This is especially sad in light of the fact that new loans are not going to develop the real economy, and for the most part to pay old debts, replenishment of gold reserves, the war in the Donbass and corruption. In fact, Kiev is taking money in debt to repay old foreign debt, and so on. To repay old debts without new just does not work. Indeed, export earnings and migrant workers are falling.

Not surprisingly, analysts at Bank of America Merrill Lynch Research did not a very comforting forecast for Ukraine in the coming years it will have problems with payments on foreign debt. This means that Ukraine is waiting for a new default or another debt restructuring (transfer of fixed payments over a longer period of time).

On the inflow of foreign investment can be forgotten, they will be modest, foreign trade deficit will be requiring the currency to cover it. All this means a catastrophic problem with the gold reserves in Ukraine. This is equivalent to a new panic and chaos in the economy. To save Ukraine from this can only Ukrainians, including migrant workers, said Okhrimenko.

According to NBU data, during 11 months of 2016, the regulator bought on the interbank currency market of 2.3 billion dollars, which went in part ($1.6 billion) to increase the foreign exchange reserves of Ukraine, partly to repay foreign debts and the deficit in foreign trade.

“What kind of currency they bought, the NBU on the interbank market? At the moment the main source for the formation of gold and currency reserves of Ukraine is the currency that is drawn on the territory of Ukraine, and the currency that you bring into the country migrant workers” – says Okhrimenko. The hryvnia, this year managed to more or less stabilize, as a result, Ukrainians began to sell their dollars from under the pillow or just the need to spend savings for a rainy day.

And that’s due to these internal resources, Ukraine can solve all their problems with external debt, he said. In fact, according to the NBU, Ukraine is drawn around 97 billion dollars in cash. Only in the last three year, the Ukrainians took from banks foreign currency in cash in the amount of about $ 16 billion. Many banks are not trusted, given how often they eliminate the NBU. Also, regularly for about 4-5 billion dollars to Ukraine comes from migrant workers.

source

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