Macroeconomic modeling and forecasting

Lesson for Ukraine: How to live within its means

unian

Over the past 10 years Ukraine’s national debt increased up to 80% of GDP, while debt service costs exceeded defense spending.Dmytro Boyarchuk, CASE Ukraine`s Executive Director, said in a commentary to UNIAN why he does not believe in any alternative ukrainian scenario of living without debts.

Director of Case Ukraine analytical group Dmytro Boyarchuk does not believe in any alternative scenario of living without debts, either. “In order to service and repay debts in foreign currency, the currency needs to come from somewhere. If exports do not grow, this means new borrowing. Meanwhile, we spend more foreign currency than we earn. The situation could be remedied with investment, but we know the current situation with investment,” the expert said, predicting in this regard the growth of Ukraine’s state debt up to 82.3% of GDP in 2016 and a slight decline, to 80.4% of GDP, in 2017.

Meanwhile, Boyarchuk believes that the reduction of the budget deficit is possible, but it requires a more efficient use of resources, which is impossible without a significant reform. This means it can be reached, but only in the medium term, not earlier. According to him, the country has a chance to avoid debt default in 2019, when the date is due for the payment on restructured bonds. However, it is not yet clear how the reform will move on and what will drive economic growth. Therefore, there are only very low-key expectations so far, according to the expert.

Read the full article [in english].

October 26, 2016