Ukraine faces an acutely challenging balance of payments position. This is among the most important of findings after visiting Kyiv on Oct. 4-6, meeting with officials from the National Bank of Ukraine, the Ministry of Finance, the International Monetary Fund, the World Bank, European Union, alongside meeting local banks, private sector analysts and diplomats.
The current account deficit is running at around 3-4 percent of gross domestic product and widening, while over the next year external debt payments falling due amount to in excess of $50 billion, suggesting an external financing requirement of $55-60 billion. Foreign currency reserves at the central bank stand at around $35 billion, but declined by around $3 billion in September and individuals are reported to have converted around $6 billion into foreign currency in the year to date.
With the global economy slowing the danger is that metals (40 percent of exports) prices dip which when combined with structural rigidities in energy import prices suggests a significant terms of trade shock to the economy which could worsen the current account position still further. The question is will the crisis and its impact on Ukraine be as serious as 2008-2009, and are the authorities better prepared and more able to react this time around?