Government debt is a set of debt obligations of a country to legal entities, individuals, other states, world organizations that are involved in the issuance of loans and financial assistance. The public debt of Ukraine consists of several components:
- central government loans;
- loans from regional and local authorities;
- loans of combined groups with state 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:
- External loans of the country. This includes all borrowed funds that were borrowed from foreign countries or international currency organizations. These loans are included in the gross external debt of Ukraine.
- Domestic loans of the country. This form of debt includes money that was borrowed from owners of securities, shares or other lenders.
In general, the debt of Ukraine 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 requested a reprieve. Here we are talking about such concepts as the extension and restructuring of the debt of Ukraine. Restructuring is a concession for the debtor, which is used as an exception. Such a force majeure circumstance may be the difficult financial situation of the borrower, with respect to the country - default.
Dynamics 2016
Since 2012, Ukraine’s debt has increased by $ 26 billion. Over the current year, the state has agreed with the International Monetary Fund for a few more credit tranches.
The current financial policy of the state provides for not so much repayment of old debts as the possibility of taking new ones. Moreover, the goal is the largest possible amount of loans. That is, in 2016, the Ukrainian government collected loans totaling $ 10 billion, and repaid debts only by 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 number of debts. This conclusion was made as a result of the signing of the restructuring agreement. Most lenders agreed to this deal and partially wrote off debts to Ukraine. This led to the fact that the total amount of loans decreased from 73 to 66 billion dollars. If we divide the total amount of loans by the whole population, then for every resident of the country there are approximately two and a half thousand dollars.
But even with some positive aspects, Ukraine’s debts are still growing. So, since 2014, as a result of the depreciation of the national currency, public debt has grown approximately by a trillion hryvnias.
“Credit of Yanukovych”
One of the loans that the restructuring has not touched is Ukraine’s debt to Russia. It has remained the same and amounts to 3 billion dollars. And this is just a fifth of the amount that Viktor Yanukovych requested back in 2013. The originally agreed amount was $ 15 billion.
Having received a refusal of the Russian Federation to request to write off part of the debt, the government announced the suspension of its actions to repay this loan in connection with emergency circumstances. That is, the state officially announced its financial insolvency.
Since the beginning of 2016, the Russian Federation announced its intention to sue. But even though the lender took more radical measures to return the money, the Cabinet of Ministers says that an agreement can be reached outside the court proceedings. Now there is a dialogue on this issue at various levels, but Ukraine’s debt to Russia remains outstanding.
Borrowers and lenders
A part of the state debt is made up of bonds that were acquired by Oschadbank, Ukravtodor, CB Yuzhnoye, and Ukrainian Railways. In total, the amount of these Eurobonds is $ 16 billion.
The country's creditors are mainly international financial organizations, such as the World Bank, International Monetary Fund, EU, European Bank. Two years ago, the Ukrainian government agreed on a four-year program, the essence of which is that the IMF will send credit tranches in exchange for a certain reform of the economy.
Repayment of loans
Experts in the field of economics unanimously say that it is quite difficult to service a large number of loans. In the current situation, the state cannot exist without borrowed funds.
Actions to regulate credit policy include economic development, attracting foreign investment.
The critical level of debt is 60% of GDP. And this line has long been passed by the state. All actions of the government this year will be aimed at ensuring that the debt of Ukraine in the percentage ratio is less than the critical indicator.