Poorly planned financial policy of Ukraine’s government and the National Bank are a threat for national currency stability and budget performance. This was stated by OPPOSITION PLATFORM – FOR LIFE MP Serhiy Lovochkin commenting on financial outcomes for the year 2019.
The politician said the national debt in currency equivalent has increased by $6.05bln or 7.7 percent. This means per capita increase from $1,858 to $2,012 in one year. The main reason behind this is the increase of the domestic national debt by 27 percent or $7.56bln (+8.8 percent or +67.6bln in hryvnia).
“In 2019, the debt on domestic government bonds grew by 12 times faster than in 2018. The budget burden of servicing government bonds increased accordingly. While in 2018 the debt required 240.9bln hryvnias to be paid, in 2019 the amount reached 334.3bln hryvnia, which is comparable to 31.2 percent of the state budget expenditures.
“In 2019, the repayment of government bonds was largely replaced by new borrowings, but constant demand for these securities is not guaranteed, and this can create threats for refinancing of such debt in the future. Moreover, the average weighted yield on hryvnia government bonds last year amounted to 16.93 percent, transforming into a real yield of 9–10 percent and making it one of the highest rates in the world. This attracted portfolio investors. But this year there will be no such profitability,” Lovochkin said.
“The worst part is that speculative foreign capital had been attracted to government bonds, with relevant investments increasing by 18 times last year. This kind of funds is easy to attract but also easy to lose if economic situation deteriorates. While global economy risks losing its growth rates over coronavirus, we’ve been seeing our national currency drop as well. If the global economic problems persist into a full-fledged crisis, our national currency will drop dramatically due to withdrawal of non-residents and foreign currencies from our banking system. Social and economic consequences are to follow,” the MP said.
The only way to avoid this scenario, Lovochkin says, is by changing national financial and economic priorities.
“Revival of domestic economy, and its manufacturing industry above all, will make Ukraine less vulnerable to global shocks. We need an industrial sector support program and an import substitution program. Without these steps we are doomed to recurrence of the crises of 2008 and 2014–2015,” Lovochkin said.Follow @serhiylovochkin