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You're reading: Recommendations for immediate policy actions to address financial crisis in Ukraine

For 2014, the
IMF assesses the actual size of the deficit at 10.1 percent of gross domestic product.

However, the
deficit might even become larger, perhaps approaching 15 percetn of GDP if off-budget
items are included as the International Monetary Fund estimates the financial deficit of Naftogaz alone
this year at 7.6 percent of GDP. 

Such a deficit magnitude cannot possibly be
closed by raising already-falling tax revenues. Neither can it be closed by
non-inflationary financing given the sharp increase in the risk-premium for
sovereign debt which is skyrocketing from 40 percent of GDP in 2013 to 68
percent of GDP according to the current base case IMF projection. In more
pessimistic scenarios it is even higher, possibly exceeding 100% in the
worst-case.

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