Why is the debt unfair?
On February 24, Russia launched a full-scale war with Ukraine
Ukraine’s independence is under a threat as a result of a full-scale Russian invasion into our country’s territory.
The state cannot afford its debt repayments any longer, as Ukraine’s economy is destabilised as a result of the military campaign, increased spending on the military, and having to deal with the consequences of war.
Presently, Ukrainians are in the epicentre of war, unable to work and earn, and we are losing our homes, economy, and property. Moreover, the military occupation campaign of the Russian Federation is destroying sites and enterprises of strategic and critical infrastructure, transportation arteries, and the economic potential of our country, as all possible resources are mobilised to support the campaign of military defence.
As Ukraine had to defend itself during the war and maintain the functioning of the Ukrainian state, it will likely face a funding shortfall of almost USD 148 billion between 2023 and the first half of 2027, according to the International Monetary Fund (IMF). Given the enormous financing requirements resulting from the ongoing aggression, Ukraine has had to resort to foreign funding.
Some of this foreign support comes in the form of loans. This is mainly supported by public donors, i.e., friendly states. A much larger proportion also comes from multilateral donors, such as the European Commission. Within a year of the war's start, public external debt increased by almost forty percent as a result of this borrowing. Ukrainian public debt is expected to rise to around 100% of GDP by 2025, and there is a risk of further increases and downward scenarios, according to the IMF.
| Creditor | Claims Total | Distribution |
|---|---|---|
| Bondholders (pre-war claims, restructured) |
16 billion US dollars | Approx. 13 % |
| Commercial banks (pre-war claims) Among others: US banks German banks French banks |
1.5 - 2.4 billion US dollars 915 million US dollars 572 million US dollars 269 million US dollars |
Approx. 2 % |
| Other governments | 9.1 - 19.2 billion US dollars. | Approx. 15 % |
| MFI Among them: International Monetary Fund World Bank European Union EBRD European Relief Fund European Investment Bank |
Approx. 87 billion US dollars 14.7 billion US dollars 22.5 billion US dollars 42.6 - 44.2 billion US dollars 1.2 billion US dollars USD 1.8 billion 3.1 - 4.3 billion US dollars |
Approx. 70% Of which: Approx. 11% Approx. 18% Approx. 35% Approx. 1% Approx. 1.4% Approx. 3.4% |
On behalf of all Ukrainians, we demand (1) the cancellation of the debt, which is now choking our state, and (2) that we be provided with multifaceted financial aid.
We demand that Ukraine be freed from the debt yoke!
Why is the debt unfair?
Why is the debt unfair?
Ukraine remains one of the poorest countries in Europe, which is now also forced to defend itself against the aggression and the military offensive of Russia’s army, the second-largest army in the world. Budgetary expenditure on arms and medical needs of the wounded has grown exponentially. In the aftermath of the war, Ukraine will also require funds to rebuild its homes and infrastructure.
In such conditions, debt servicing is only possible if Ukraine is to deny its citizens satisfaction of their most urgent needs.
Chaotic borrowing and antisocial debt conditionality were a result of total oligarchization: unwilling to fight the wealthy, the state rulers continued to accumulate deeper debt. Loans were issued under conditions of social spending cuts, and their repayment forced people to economize on vital needs and apply austerity to foundational economic sectors.
Due to a lack of funds, Ukraine’s hospitals are poorly equipped, and medical worker jobs of all ranks are cut. Those with remaining jobs are underpaid, as are teachers and other public sector workers. For example, many in the mining industry are not paid at all, with wages late.
The largest trade union organisations in the country, which represent over 5 million workers, have also joined the call for debt cancellation.
Who would benefit from the debt burden cancellation?
Such a move would help the people of Ukraine, as due to the military invasion, it needs funds to protect its civilians, provide housing for the displaced people, and medication for the wounded.
Such a move would be beneficial to our EU neighbors as it would invigorate economic activity in Ukraine and would thus lower the chance of an ongoing war in Europe, and would allow for the rebuilding of Ukraine’s economy and the bomb-annihilated infrastructure. The welfare of Ukraine is critically important for the stability of the whole of Europe and the world.
What would be the consequences of the debt burden cancellation?
- It would facilitate the reconstruction of the strategic and infrastructure enterprises destroyed as a result of military action
- It would halt austerity in the social sphere and would allow, with time, to rebuild their functionality and quality, and allow their workers to make a decent living
- It would establish justice in relations with the EU and Ukraine, and would become yet another meaningful act of support.
We express our gratitude to the Polish party Razem, which has already proposed that the European Central Bank and other creditors assume Ukraine’s debt obligations.
Links:
- https://www.imf.org/external/np/fin/tad/extforth.aspx?memberkey1=993&date1key=2021-12-31&category=forth&year=2018&trxtype=repchg&overforth=f&schedule=exp&extend=y
- https://bank.gov.ua/files/ES/ZB_y_en.pdf
- https://www.ceicdata.com/en/indicator/ukraine/external-debt
- https://tradingeconomics.com/ukraine/external-debt
- https://partiarazem.pl/2022/02/uwolnijmy-ukraine-od-dlugow/
- https://partiarazem.pl/2022/02/postanovlennya-natsionalnoyi-rady-partiyi-livi-razom-shchodo-napadu-rosiyskoyi-federatsiyi-na-ukrayinu/
- https://www.opendemocracy.net/en/odr/why-ukraine-needs-foreign-debt-cancellation-now/?fbclid=IwAR10t8ir-9bcliZmOKOEy7wO1m2_w6LVekzUKjfCstrz5cY6mwhPTm2uepU
