Pro-Russian separatist stands guard in front of a building damaged during fighting between pro-Russian rebels and Ukrainian government forces near Donetsk Sergey Prokofiev International Airport, eastern Ukraine. Photo: Reuters

The VoxUkraine Brief:

How To Avoid Ukraine Defaulting

#VoxUkraine weekly selection of best articles on Ukraine.

by Tom Coupé, VoxUkraine Editorial Board, Kyiv School of Economics

produced by Maxim Eristavi


Concerns about whether or not Ukraine will be able to pay back its government debt are again worrying the financial markets as Ukraine’s July 2017 bonds are now trading below 60 cents on the dollar.

“If you expect Ukraine to lengthen the maturities by three to five years only, without a haircut, the bonds should trade above 80 cents.”

The main question now is whom will bail out Ukraine. The must-reads from this week come from this debate. From one side, there are those who argue Western donors should provide money to Ukraine — a good example of this is Soros’s plea for Europe to step in.

“Europe needs to wake up and recognize that it is under attack from Russia. Assisting Ukraine should also be considered as a defense expenditure by the EU countries.”

Also some people at #VoxUkraine have argued for Ukraine to rely on extra borrowings. Yuri Gorodnichenko argued that it might be better for Ukraine to borrow extra money rather than to cut expenditures too much during the recession:

Similarly, #VoxUkraine’s Yuri Gorodnichenko and Oleksandr Talavera argued it is better to borrow to finance the war in Ukraine rather than to rely on increasing taxes or printing money

And #VoxUkraine’s Olena Bilan argued that compared to bailing out Greece, bailing out Ukraine is cheap:

At the other side of the debate, there are those who argue that Ukraine should bail out primarily itself, and that extra money from donors will be used by the Ukrainian politicians to avoid the needed but likely unpopular reforms. This week’s Bloomberg column by Leonid Bershidsky supports this view:

“It’s not the foreign governments and the IMF that are missing an historic opportunity to build up Ukraine, but the country’s own politicians.”

A view that is also shared by some at VoxUkraine. Check out #VoxUkraine’s column by Dmytro Boyarchuk, Vladimir Fedorin, Serhiy Marchenko and Ilona Sologoub, lines out how to cut Ukraine’s expenditures

And also #VoxUkraine’s Pavlo Kukhta argues in favor of cutting expenditures:

Both sides of this debate have solid arguments and to avoid default Ukraine and the international community will need to take the arguments of both sides of the debate into account — how exactly the burden will be distributed will be decided in the coming weeks — so stay tuned!


Also, this week on #VoxUkraine

War is not the only grave problem for Eastern Ukraine coal industry. Ukrainian economy in grave need of cheap energy to survive. But the war in eastern Ukraine cuts the country out of its main energy source — coal. In fact the brutal armed conflict is not the only major problem that threatens the main energy bloodline of Ukraine.

http://voxukraine.org/2015/01/09/war-is-not-the-only-grave-problem-for-eastern-ukraine-coal-industry/

Dual citizenship is the key to reforms in Ukraine. There are several millions of people of Ukrainian origin living in North America and European Union. This is a great reservoir of know-how for revival and modernization of Ukraine. The cultural and political ties are proven pathway to a more meaningful economic cooperation.

http://voxukraine.org/2015/01/07/key-to-reforms-in-ukraine/

5 reasons why Ukraine’s Crimea is happy with Russia. Russia has annexed Crimea in March 2014. What has happened since then? We want to look through the main arguments on what makes pro-Russian Crimeans happy.

http://voxukraine.org/2015/01/05/happy_crimea_happy_russia/

Ukraine budget limits independence of central bank monetary policy. New Ukraine’s budget will make the job of saving the collapsing economy even harder. Specifically by continuing the practice of making the central bank a government’s piggy bank.

http://voxukraine.org/2015/01/02/transparency-and-accountability-as-prerequisite-for-public-spending/

And this is an absolute must-read, people: 5 reasons to be hopeful about Ukraine In 2015:

http://voxukraine.org/2015/01/01/be-hopeful_2015/

Joye is always right. Have a great weekend!


VoxUkraine: Best Minds. Ukraine Analysis.

VoxUkraine is an international opinion platform that promotes research-based policy analysis and commentary by the world’s leading scholars, policymakers and businessmen. Our readers represent governments, international organizations, academia and the private sector as well as journalists specializing in economics, politics, and business.

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