Recently, the European Union published a report on the state of the economy in Ukraine, which analyzed and analyzed the financial and monetary situation in Ukraine, and the results were shocking. According to the report, Ukraine's economy is facing a serious crisis, and if emergency measures are not taken, Ukraine may not be able to repay its huge foreign debt by March next year, leading to bankruptcy and default.
The report notes that the plight of the Ukrainian economy is mainly in the following areas:
First, the domestic political situation is turbulent, which affects economic stability. Since the coup d'état in 2014, Ukraine has been in a state of civil strife and suffrage, with the legitimacy and effectiveness of the country being questioned, and the opposition and civil society organizations constantly launching stalks and strikes, leading to chaos in social order, hindrance of economic activities, a decline in investor confidence, and an increase in capital outflows.
The second is the escalation of the conflict with Russia, which has caused economic losses. Ukraine, with the support of the United States and the European Union, has been trying to resolve the problem of the eastern Donbas region by force, drawing it into a confrontation and military conflict with Russia. This not only led to a large number of personnel and material losses, but also cut off Ukraine's economic and trade ties with Russia, causing Ukraine to lose its largest partner and energy country.
Third, the energy crisis and inflation have intensified, weakening the economy. Due to the expiration of Ukraine's energy contract with Russia, which Russia refused to renew, Ukraine had to buy gas from the European market,** up to $500 per thousand cubic meters, more than three times that of Russia. At the same time, the European energy market has been tightened and soared due to sanctions imposed on Russia by the United States and the European Union, further increasing Ukraine's energy burden. The energy crisis has triggered inflation, and the price level in Ukraine has increased by 30% in 2022, including 40% for food, and people's livelihood difficulties have intensified.
Fourth, the pressure on external debt is enormous, and it is difficult to make up for the funding gap. In response to the economic crisis, Ukraine** has continued to borrow from international financial institutions and Western countries, which has led to an increase in the scale of its external debt, which has now reached more than 80% of GDP, far exceeding the internationally recognized safety line. Moreover, a large part of Ukraine's external debt is short-term debt, which needs to be repaid by March next year, totaling $15 billion, accounting for more than half of Ukraine's foreign exchange reserves. However, Ukraine's foreign exchange earnings are very limited and mainly rely on the export of agricultural products and metals, which are affected by fluctuations in the international market, making it difficult to guarantee stable income. In addition, Ukraine is under pressure from the International Monetary Fund (IMF), which has demanded a series of reforms and adjustments, including raising energy**, cutting fiscal spending, and strengthening anti-corruption, as a condition for continuing to provide loans. However, these measures will cause opposition and resistance within Ukraine, and it will be difficult to implement and gain the trust and support of the IMF.
The report argues that the outlook for Ukraine's economy is very bleak, and if emergency measures are not taken, Ukraine may not be able to repay its huge foreign debt by March next year, leading to bankruptcy and default. This will have catastrophic consequences for Ukraine's economy and society, as well as serious shocks and risks to Europe's financial stability and security situation.
The report recommends that the EU should strengthen economic assistance and political support for Ukraine to help Ukraine tide over the difficulties, and at the same time promote dialogue and peaceful resolution between Ukraine and Russia, avoid escalation of the conflict, and maintain peace and stability in Europe.