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Default in Ukraine inevitable — Russian presidential advisor

October 09, 2014, 13:26 UTC+3 MOSCOW
Ukraine’s economy needs at least between $100 billion to $120 billion to recover, the Russian president’s economic advisor Sergey Glazyev says
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Russian presidential economic advisor Sergey Glazyev

Russian presidential economic advisor Sergey Glazyev

© ITAR-TASS/Mikhail Metsel

MOSCOW, October 9. /TASS/. With shrinking economy and a deteriorating balance of payments, Ukraine’s default is becoming inevitable, the Russian president’s economic advisor Sergey Glazyev told the Eurasian Economic Integration conference on Thursday.

“The balance of payments and its dynamics indicate that Ukraine in the near future will be unable to independently fulfill its state commitments. The question arises who will pay for this. The aid that the EU and the US have promised is not enough to cover the holes in the balance of payments, that’s why, in my opinion, the default is inevitable. Will it become selective? Not likely. It will be overwhelming,” Glazyev said.

Glazyev also said that Ukraine has already entered the phase of an economic catastrophe. According to the Eurasian Development Bank (EDB), Ukraine needed $55 billion to stabilize the situation some six months ago.

However, international institutions have offered the Kiev regime the sum some 1.5-fold less than needed and have not practically given anything, Glazyev said. Now Ukraine’s economy needs at least between $100 billion to $120 billion to recover. “Ukraine has missed the trajectory, according to our estimates, when stabilization was possible, and is now on the territory of a sharp slowdown where any stabilization will demand $100 billion or $120 billion,” Glazyev said.

According to Glazyev, if Ukraine fails to keep itself on this milestone, the country’s GDP is expected to drop by 50%, investment will stall and the Ukrainian economy will collapse. Under this scenario, the way out of the economic crisis will demand $300 billion, he said. “It is clear that without Russia and the Customs Union, Ukraine has no chances to take the path of sustainable development,” Glazyev stressed.

Consultations with the International Monetary Fund (IMF) have shown that the maximum funds it can give to Ukraine will be used only for refinancing these loans. Therefore, the IMF policy towards Ukraine is aimed at avoiding the country’s default, he said.

Prior to Ukraine’s move to sign the Association Agreement with the EU in late June, Glazyev said it would be an “economic suicide” for the country, warning of the hryvnia devaluation, soaring inflation and a drop in living standards.

The implementation of the agreement has been postponed until December 31, 2015, following consultations between Russia, the EU and Ukraine in Brussels in mid-September. Moscow earlier said it would take protective measures against imports from Ukraine.

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