The Joplin Globe, Joplin, MO

Business

February 25, 2014

No easy bailout plan for Ukraine

KIEV, Ukraine — Ukraine needs money, and fast — in weeks, not months. But bailing out the country of 46 million people will not be as easy as simply writing a big check.

For one, Ukraine has already burned the main global financial rescuer, the International Monetary Fund, by failing to keep to the terms of earlier bailouts from 2008 and 2010.

Now it needs help again, and its economic and financial problems are worse than before.

The currency is sliding, raising concerns that companies that owe money in foreign currency could go bust. Banks are fragile. A rescue with outside lenders can’t be agreed until there’s a government. And Russia could make things worse by demanding payment of money owed for natural gas supplies.

Even with a bailout, the country would face testing times. It would likely be asked to make painful reforms — including a potential doubling in the price of gas — that would hurt standards of living as the economy recovers.

HOW MUCH?

Analysts estimate the country will need between $20 billion and $25 billion for 2014 and 2015, perhaps $15 billion this year and $10 billion the next. The money would help pay salaries and pensions and maturing bonds. Acting President Oleksandr Turchynov says the treasury account used to pay bills is almost empty.

Ukraine’s acting finance minister, Yuri Kobolov, says the country needs $35 billion to cover this year and next and expressed hope that Europe or the United States would help, hopefully within the next two weeks. Ukraine has major debt repayments coming up in June but analysts indicate it probably won’t make it that far without help.

The Institute of International Finance, a Washington-based association of banks and financial companies, warned that Ukraine’s finances “are on the verge of collapse.”  

“It’s crunch time for the economy,” said Lilit Gevorgyan, an analyst with IHS Global Insight in London. “All those issues they have swept under the rug are re-emerging.”

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