Ukrainian economy and its options to join EU or Customs Union
Special Report of dispatch News Desk
Since Ukrainian economy is being failed to cope with the payment of the external debt therefore resolve the situation may join the Customs Union but the political elite of the country is unlikely to be decided on the move in the near future.
Ukrainian foreign exchange reserves fell to a minimum – in store only a little less than 23 billion dollars. In a difficult economic situation, the authorities have no choice but to spend emergency reserves.
In addition, it is time to pay the debts of the International Monetary Fund – recently returned to Ukraine IMF half a billion dollars, and the rest of the year it is necessary to pay more than two. This is good that Kiev does not get new loans from the IMF since 2012 but without new loans it is becoming difficult and hard to run the country. Country’s reserves are melting – the economic situation in Ukraine is really on the verge of collapse if it fails to manage it bills of payments.
Experts believe that Ukraine’s economy did experience a state of default technically. Since default is not beneficial to anyone so nobody is ready to announce it. But all trends point to an extremely negative development in the Ukrainian economy.
Back in the early 2012’s gold reserves in Ukraine amounted to nearly 32 billion dollars, and in late 2012 they accounted for 24 billion dollars. In 2013, the rate of reduction of reserves in Ukraine slowed down, but only for the reason that Ukraine has reduced purchases of Russian gas by 35 percent. Ukraine can not, reduce further because otherwise it will leave no gas or the European Union or freeze itself, because it is not possible to fully cover its industrial and household needs its own gas production.
Therefore, the only way out for the Ukrainian economy in this situation is to join the Customs Union which will lead to a drop in gas prices and a large-scale energy supplies for the Ukrainian Soviet-energy intensive industry.
Summary of the “debt noose” indicates that the share of debt service costs in the state budget of Ukraine exceeds the total expenditure on education and health. Debts must be restructured because debt retirement is stressing Ukrainian economy. The problem is not often economic issues related to questions of policy, with the development of Ukraine as a state or Eurasian or as a European state. In fact, this concept is very arbitrary, and very often the “stranglehold of debt” is used in a purely political, not economic, purposes.
The IMF demanded from Kiev to deeply unpopular reforms that directly hit the well-being of the population, and only then can begin negotiations on a new loan. The new loan will not save the Ukrainian economy in the current circumstances, it is just a little bit will delay economic collapse but work also as snowball effect and disaster will come, maybe a few years later. Only some fundamental changes in economic structure can help Ukraine to survive the economic disaster.
Now question is this, who will loan Ukraine to come out the clutches of IMF? Can Ukraine expect to receive a loan from Russia? This possibility is being considered?
Getting the Russian loan also associated with a number of policy decisions, because Russia cannot just give lend money to Ukraine because Russian loans can be provided in various forms, but only in exchange for a series of political and economic decisions.
It turns out that Ukraine is now three roads: a new loan from the IMF, lower gas prices and the reception of the Russian loan. Where does Ukraine go?
Ukrainian elite is now at a crossroads, but, no matter what party it belonged to neither, always firmly on course for the West. And now it can be said that the Ukrainian elite will try to keep the exchange rate in the West. For Ukraine, it is important to entry into the European bureaucracy, it is important to become some of the politicians of the Brussels level, and the Ukrainian economy is interested in so far as, as well as the welfare of its citizens.
Experts believe that for the Ukrainian economy would be much more profitable to focus on the alliance with Russia.
The country will face a very difficult autumn. As the political, economic and experiences, to buy or invest in the reconstruction of the Ukrainian gas transportation system that Europeans are not in a hurry. So far, the real interest in this expressed only the Russian Federation. Grant any loans to Ukraine powerful European Union while also not in a hurry – Ukraine has a very low credit rating.
So, what really interested in the development of the Ukrainian economy only of the Russian elite. European and American elites are interested in seeing Ukraine blocked the Russian initiatives, the development of the post-Soviet space.
And what will happen to Ukraine itself – it will fall apart, whether it is extremely low level of prosperity, a sharp deterioration in the economy, unpopular reforms and the impoverishment of the population – they do not care. For them the main thing – it’s blocking Russian political initiatives in the former Soviet space.
