World Bank: Ukraine Will Have to Take out New Loans to Pay Existing Debts

Translated by Ollie Richardson & Angelina Siard

19:48:29
18/02/2018

strana.ua

The World Bank reminded Ukraine that it has to pay its debt obligations, otherwise it will lose the possibility to obtain new credits in foreign markets. This was stated by the Vice President of the World Bank Cyril Muller in an interview to “ZN.UA”.

He is sure that Ukraine will be able to pay its debts both this year and in the upcoming years.

“There is already a funding plan, which will help you to do this. You won’t remain alone with the ‘debt’ problem,” noted the representative of the WB.

According to the interlocutor, the Ukrainian authorities must change their approach to their debt policy, by planning not only to obtain financial resources, but also future payments for loans, stretching these payments in time.

“Secondly, it is important for Ukraine to retain access to the financing not only of the World Bank and the IMF, but also of loans in foreign markets. And it is necessary to raise funds to finance current debts,” said Muller.

“In order for there to be an opportunity to obtain new credits, international sources of financing must be sure that the Ukrainian economy will develop,” he added.

“Debts need to be repaid. It is a good signal for creditors and an opportunity to receive new financing. But it is necessary to be very careful when attracting new loans. And, of course, it is necessary to take a balanced approach towards the sums of borrowing,” stressed the Vice President of the WB.

“There isn’t a need to accumulate debts, because in the future a part of the State’s revenues will be used to pay them off, therefore there is a need to borrow, being aware that an increase of the State debt is a no smaller risk than refusing to service debts,”  he noted.

Earlier a similar statement was made by the Prime Minister Vladimir Groysman. He said that Ukraine can’t live without external financial support. “Today we spend 130 billion hryvnia ($4.8 billion) on servicing external debts. We in the mean time can’t independently today develop the economy without external financial support,”  stated Groysman.

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Also, as “Strana” wrote, the $7 billion loan that Ukraine can receive from the People’s Republic of China for bridges and roads bears in itself serious risks for the national economy.

This was reported by the Executive Director of the Bleyzer Foundation Oleg Ustenko, writes “economy.apostrophe”.

“We are speaking about a huge sum, which will instantly increase the volume of our public debt to nearly 90% of GDP,” said the expert.

He noted that it will lead to a significant – 1.5-fold – violation of the Maastricht criteria. These indicators dictate that the national debt of a country can’t exceed 60% of GDP. Their fulfilment is a mandatory condition of a country’s entry into the eurozone.

“We will be in a zone of increased risk,” warned the expert.

He also noted that it is “extremely inexpedient” to implement infrastructure projects in a country with a low standard of living, especially in conditions of increased corruption.

In addition, Ustenko noted the considerable amount – $200 million annually – of interest payments in the case of obtaining such financing under 3% per annum, as is currently being declared. This sum equals 2% of Ukraine’s GDP, stressed the expert.

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