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 Ukraine on the Brink of Disaster: Government Will Default and Collapse Hryvnia, Thinks the Former Minister of Economy

Declaration of default and the sharp depreciation of the hryvnia may be consequences of the fact that the government cannot cope with the payments that must be carried out in 2013.

This was stated by President of the Market Reforms Center, the ex-Minister of Economy Volodymyr Lanovyi in an interview with Radio Liberty

According to the economist, the situation in the domestic economy is very negative.

"National Bank's reserves have fallen to $ 25 billion. Currency is necessary also in order to meet domestic demand for dollars. In 2012, the population of Ukraine has bought $ 10 billion, this is done at the cost of internal resources, and here we also have obligations to return the money for previously received loans," said Lanovyi.

"In addition, there are other credit commitments, which are provided by private investors, the Russians, other governmental and international organizations totaling $ 9.3 billion in 2013. There are no resources, positive change regarding the income of currency in Ukraine, which means the country is on the edge of financial disaster," he said.

Anticipating further developments, the expert suggested that the government would have to default on its debt to private investors. At the same time the world will ban issuing any loans to that government.

The old debts will be delayed, but with increased interest rate. According to Lanovyi, this will lead to a forced reduction of social and many other costs of domestic needs. This, in turn, will seriously worsen the lives of ordinary people.

Speaking on the estimated dollar rate, the economist stated that forecasts of 8,7-8,9 hryvnia to the dollar are too optimistic. More realistic is the drop of the domestic currency to a mark of more than 9 hryvnia to the dollar.


"There comes a time when the National Bank does not have cash dollars, while sellers will be able to raise the dollar rate. If the regulator makes any administrative, force action, then the sale will go to shadow form. Therefore th regulator will have to give in to the rate change," said Lanovyi.

 
 
 
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