Ukraine’s public debt has risen to a historic high. Economists consider the situation critical
30 April 2024 12:13
ЕКСКЛЮЗИВ
In the first quarter of 2024, Ukraine ‘s total public debt increased by $5.73 billion and 3.9% to $151.05 billion in dollar terms, or by UAH 404.8 billion and 7.3% to UAH 5 trillion 924.3 billion in hryvnia terms. This is evidenced by the data on the website of the Ministry of Finance of Ukraine, "Komersant Ukrainian" reports
The direct public debt increased by 4.8% to $141.10 billion, or UAH 5 trillion 612.6 billion, and accounted for 94.7% of the total public and publicly guaranteed debt.
In the first three months of 2024, Ukraine’s total external public debt increased by 6.3% or $6.39 billion to $108.09 billion. The total domestic debt increased by 1.7%, or by UAH 28.2 billion, to UAH 1 trillion 684.7 billion. Thus, the share of total external debt in the total debt structure increased to 71.6%.
Economic expert Oleh Pendzin notes that, according to classical economic theory, the amount of public debt should not exceed 60% of gross domestic product. In Ukraine, this figure is close to 100%.
“This debt is critical for Ukraine. The prospects for its repayment directly depend on the economy’s capacity. Unfortunately, today the capacity of the Ukrainian economy is extremely low,”
– says the expert.
According to him, a number of key factors indicate that the economic situation in the country is critical.
“We have a very bad demographic situation. We need 5 to 7 million workers to restore the economy. The situation with mobilisation complicates and worsens the situation with democracy. Restrictions on the provision of consular services abroad clearly put an end to the possibility of returning men who have left the country. Another point that also characterises the debt-to-economy ratio is the structure of our exports. We are a raw material country, we have raw material exports with very low added value,”
– the analyst believes.
According to him, the issues of demographics, economic recovery and debt are directly related to each other. A weaker economy means more expensive debts in the future. At the same time, the expert does not rule out the possibility of writing off the debt or a part of it, but stresses that in this case, it would be a political step.
“There are commercial borrowings, and there are politicised borrowings, borrowings of Ukraine as a sovereign. This is what the IMF, Americans, and Europeans give us – debts under political obligations. They are cheaper, but they are accompanied by memoranda with the IMF, which contain a huge number of reforms that Ukraine must implement. So, in essence, it is money in exchange for reforms. Theoretically, these debts can be written off, both European and American, which means that the debt can be reduced. But the write-off directly depends on our progress on the path of reforms, which are not easy in themselves,”
– oleg Pendzin emphasised.
