Ukraine may face technical default, Andrij Yermolayev opines

October24200820:26

The major risk for Ukraine in the conditions of the world economic crisis is the negative consequences of the recession that hit leading economies, leading them to cut down on Ukrainian industrial exports. As Ukraine failed to implement the needed structural reforms, its budget and hard currency revenues depend largely on the situation in export-oriented steel and chemical sectors.

Respectively, these sectors have been and remain to be a major source of domestic investment, both via the budget and via private investment. They serve as powerhouses for economic processes. “Their dwindling will lead to unemployment, shortfalls in budgetary revenue, and, most importantly, may endanger the national security as these weak sectors may become easy prey for foreign speculators. Both Russian and western buyers are eagerly eyeing Ukrainian assets. The worse the situation Ukraine may find itself in, the sooner our oligarchs will try to wash their hands of their raw materials companies, he says.

The repayment of Ukraine’s corporate debt is another major challenge for the country. “Apart from the state debt, Ukraine’s corporate debt stands at $80 billion. Against the backdrop of world recession, currency fluctuations, downfall in hard currency revenues, the failure to repay the debt may lead to the technical default,” Yermolayev warns.

He is not predicting a default, he is merely saying it is likely, the expert stresses: “Ukraine can still take the necessary steps to minimize the risks.”