Ukraine on the Edge of an Economic Crisis
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Some of the largest retailers throughout Ukraine are noticing signs of a potential economic crisis. Though warehouses across the nation continue to hum with workers, the deteriorating economy has meant that most businesses are barely keeping their heads above water.
According to economic experts, if Kiev cannot find a way to generate billions of dollars quickly, the country could be dealing with an economic catastrophe. Many people believe Russia has bullied this smaller country and battered their economy.
Some of the largest retailers throughout Ukraine are noticing signs of a potential economic crisis. Though warehouses across the nation continue to hum with workers, the deteriorating economy has meant that most businesses are barely keeping their heads above water.
According to economic experts, if Kiev cannot find a way to generate billions of dollars quickly, the country could be dealing with an economic catastrophe. Many people believe Russia has bullied this smaller country and battered their economy.
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The Story so Far
According to estimates, the economy shrank by more than 8% last year, in part due to lost revenue throughout the war-ravaged region of Donbass, where the primary moneymaking industries (steel and coal) are located.
Furthermore, Kiev is paying billions in an effort to reduce its loans, support the local currency and obtain gas from Russia. The government is constantly losing money, and the more money that they lose, the more desperate the situation becomes.
A large concern today is that because the hard reserves of the currency have fallen so low, the government may not be able pay off its loans at all. The worst-case scenario is that Ukraine would default on its obligations, banks would close, and the currency would fall even further, leaving Ukrainians to struggle even more and to lose complete confidence in this country.
Assistance from the IMF
The IMF has recently launched a mission in Kiev that would release $5bn of a $17bn bailout program organized last year. So far, the fund released $4.5 billion to aid the country. However, even if more is released, it could be too little too late. Officials have suggested that the Ukraine could need $15bn more in extra assistance to survive.
None of this financial assistance is certain. All of the potential donors for the Ukraine, including the EU, the IMF, and the US have said that Kiev first should tackle corruption, cut its bureaucracy, and commit to reforms before they will get involved. Well, that is on you Ukraine. Like America’s federal government, it appears your central government is bloated. Cutting fat would help.
Cut the Bloat
At this point, no reforms are in place. The Prime Minister and President, Arseniy Yatseniuk and Petro Poroshenko, have only taken relatively small steps towards meeting foreign demands. What’s more, government spending remains far too high. Although parliament passed a budget attempting to reign in big government, it has so far failed to have any impact.
