Default in Ukraine. What does it mean for Ukraine default? The forecast of a default in Ukraine

The end of 2014 was very difficult for Ukraine. In the broad masses and in the media it was quite often heard that the country in the near future would simply not be able to pay the bills, and default in Ukraine would be inevitable. Prerequisites for this trend are serious problems in the financial sector. Panic moods were formed due to a significant reduction in resources, thanks to which the state had to fulfill its obligations.

Data

As of January 31, 2014, the country's external public debt was 222.4 billion hryvnia, or 27.8 billion dollars. This figure corresponds to 38% of the total debt that the country guarantees and which equates to 585.3 billion hryvnia, or 73.2 billion dollars. By early 2015, the state was obliged to pay about 12.7 million hryvnia, and this is only on external guaranteed debt. In accordance with the state budget, which its author Yatseniuk calls far from ideal, in January there were payments in the amount of 6.03 billion hryvnia exclusively for debt servicing. The payment of the principal amount of debt was only 6.67 billion hryvnia.

What caused the excitement of experts?

Disputes among experts on whether a default in Ukraine or not, were caused by a sharp decline in the country's gold and foreign exchange reserves, which is used to service external debts. You can talk about the reduction in assets in November 2014 compared with October by 20.82%. If you convert the indicator into a monetary format, it will be 2.621 billion dollars. Moodys agency reacted negatively to this statement, in which 4,500 experts from 26 countries work. It made a default forecast in Ukraine, in terms of the fact that over the past 10 years the ZRV reached its record low.

What does the government say?

Despite the fact that the probability of default in the country is considered by many experts with high probability, the government has on this account their beliefs. 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 hryvnia per dollar and support for the military conflict in the east of the country. Unsuccessful repeated attempts to exhaust the conflict, which resulted in a failure, became a prerequisite for the fall of Ukrainian Eurobonds. Despite the take-off of the budget adopted on December 29, 2014 and the actual situation, according to which the budget deficit amounted to 63.67 billion hryvnia, the government at the beginning of the year actively said that there was enough money for everything. However, only one fact of lack of money for debt servicing already speaks of a full-scale financial crisis. Cope with the implementation of debt obligations will be possible only with the active support of external creditors.

What is default?

A default in Ukraine can be viewed as a kind of protective barrier that can protect the country from total economic bankruptcy. The mechanism of the procedure provides for granting the borrower the opportunity to repay the debt under an optimized scheme. We can talk about restructuring the debt, including on the deferral of payments, until the moment when the country does not come out of the crisis. In general, the phenomenon will provide an opportunity to restore the domestic economy of the state. As for the theoretical side of the issue, only one mention of this term causes panic in society.

What phenomena experts say about the default in Ukraine?

If an official default in Ukraine is announced, mass claims will start to emerge 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 contractors will increase as a consequence of the reduction of bona fide payers in the country. The consequences of the default for Ukraine are very difficult to assess, since the difficulties in the banking sector of the state will affect the impact on each sector of activity and development of the state.

The outflow of investments only complicates the situation

Vasily Yurchishin, who holds the position of an expert in macroeconomics, says that the situation in the country has been shaken by a rather large outflow of investments. The first thing that discourages foreign investors is the military conflict in the east. You can talk about quite low ratings of the country at the international level. Gosstat reports that in the period from January to September in the economy of the state was invested only 1.8 billion hryvnia. It is during this period that the growth of foreign direct investment has decreased by 14.9%. This has a direct bearing on the devaluation of the hryvnia, which, according to official data provided by the National Bank of the country, was 58.9%. The government reassures the population that the country is not deprived of the support of America, China and the EU, tranches from which are able to solve all the problems of the state. Despite the circumstances, virtually no one undertakes to declare that Ukraine is on the verge of default. Bets are made on the opportunity to bypass the phenomenon due to the powerful support of partner countries.

What awaits Ukraine in the future?

Experts, considering the question of whether Ukraine will default, it is difficult to give a definitive answer to it. The further development of the situation will depend solely on the decision of the world's states in the aspect of rendering assistance. If the phenomenon takes place, the country though will receive chance by long rehabilitation to leave again on a world scene, but it should face some difficulties. Studying the question of what it means for Ukraine to default, we can talk about the fall of the international rating, hence, a massive outflow of investor's capital is inevitable. World countries will cease to give loans, funding will be available only at a high interest and with the provision of collateral. The fall in the currency exchange rate, a fall in import volumes, a reduction in real incomes of the population, an increase in unemployment is only the main thing, experts say. A negative imprint will be imposed on the banking segment, in particular, the closure of many financial institutions, the closure of customer accounts, the complication of the process of lending to real sectors of the economy. There is a possibility that a part of banks and participants of the securities market will withdraw from themselves all obligations, following the example of the state. The growth of unemployment is inevitable. Experts, soberly assessing the current situation, note the presence of the entire list of phenomena, more and less pronounced in the country's economy today.