In addition to what has been committed so far, President Petro Poroshenko says Ukraine needs up to $15 billion from the West to avoid defaulting on its debts. Donor nations, meanwhile, are awaiting an International Monetary Fund assesment due on Jan. 29.
So far, Western nations helping Ukraine are far short of the mark. Germany has issued guarantees for Ukraine to borrow $0.7 billion and the U.S. plans to guarantee $2 billion in debt.
“Money will be used to meet external obligations in the first place – not for covering the budget deficit, salaries or pensions,” Prime Minister Arseniy Yatsenyuk said on Jan. 9. “It was not us who took $40 billion (in debt) in three years, it was (President) Viktor Yanukovych and the former regime.”
The country will have to pay off $11 billion to foreign debtholders this year, he added.
IMF’s previously approved $17-billion bailout program (through which only $4.6 billion has been disbursed) is clearly not enough to meet the economic challenges of a nation facing a Russian-backed war.
Last year, Ukraine received $9 billion in foreign assistance altogether, but still central bank reserves plummeted to $7.5 billion in December.
In December, the IMF started talking about a $15 billion gap — five percent of what Greece, a European Union member, received to overcome its debt crisis. Foreign creditors are moving slowly in stumping up the cash, by comparison, since Ukraine is not an EU member and has a history of wasting aid through various corrupt schemes.
Jean-Claude Juncker, the European Commission president, said the EU wanted to help reform, not bail-out, Ukraine. “We want to help the Ukrainian government to put its reform agenda into practice and trigger real change for the country and its people,” Juncker said.
George Soros, an American billionaire organizing a donor conference to help Ukraine, said Europe must do more.
“European political leaders must tap into the large unused borrowing capacity of the EU itself and find other unorthodox sources to be able to offer Ukraine a larger financial package than the one currently contemplated,” he wrote in a column for the New York Review of Books.
“Europe will be indirectly also defending itself” by helping Ukraine, Soros concluded. “By offering financial and technical assistance commensurate with the magnitude of the reforms, they could exert influence on the Ukrainian government to embark on radical reforms and give them a chance to succeed.”
The EU’s balance of payments assistance facility has unused funds of $47.5 billion and the European financial stability mechanism has about $15.8 billion, Soros wrote. And other sources could be tapped for up to $20 billion more.
Foreign aid to Ukraine
Soros came to Kyiv on Jan. 14 to meet with local politicians and map out an anti-corruption strategy.
Oleksandr Zholud, an economist with the International Center for Policy Studies in Kyiv, says he is sure Ukraine will receive at least $15 billion of foreign help this year instead of the planned $10 billion.
But Zholud said Ukraine should do more to plug its own financial holes — such as Naftogaz, the state oil and gas monopoly that loses up to $1 billion a month.
Olena Bilan, a macroeconomic expert at Kyiv-based investment house Dragon Capital, adds that “the cost of inaction could be much higher.”
“This would give Russia another ideal opportunity to regain its grip on Ukraine and ultimately win its geopolitical showdown with the West,” she wrote in a Financial Times blog on Dec. 10.
Kyiv Post staff writer Olena Gordiienko can be reached at [email protected].
