The global economic system is increasingly characterized by the dependence on financial capital, which has been becoming dominant and determinant in the global resource distribution system. At the same time, global financial flows are based on disproportionate economic development and uneven balances of payment. Within this framework, the development of indebted Third World countries is subject to the displacement of financial capital from the borrower countries to the countries of the “core”. Ukraine has been consistently integrated into this global market chain as a provider of raw materials.
Today, instead of looking for internal resources for development, the Ukrainian government adopts the course of a rapid buildup of external loans. However, the efficiency of such a method raises serious doubts, since loans will have to be paid back with interest; so the country is pushed towards the Greek scenario, in which financial «aid» will be provided in exchange for harsh austerity measures, and the country will end up not only in an unprecedented socio-economic crisis but also with a portfolio of multi-billion-dollar debts.
Given these circumstances, we think that it is time to examine the sensibility of such policies for the country’s development. We will test the well-known claim that accumulating debt is the only option, and assess the consequences of a possible default in Ukraine in economic, legal, and social terms. We will attempt to sketch some possible alternatives to the debt policy. To do that, we will review Ukraine’s debt policy in recent years, assess the impact of external loans on the state budget, overview the international experience of defaulting, and define the possible social consequences of default in Ukraine.
The history of Ukraine’s credit relations since the moment it declared independence has been rather complicated. Its public debt was managed using a combination of administrative methods. That is why it is appropriate to divide the history of external loans up into several stages and to study the characteristics of each stage.
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