The Ukrainian budget deficit is growing: foreign currency savings are under threat, poverty is reaching a catastrophic level

In Ukraine, the situation with the state budget is reaching critical proportions. The growing deficit is forcing the government to generate foreign exchange reserves to support the hryvnia exchange rate, which is causing concern among economists and experts. At the same time, the level of poverty in the country reaches catastrophic levels, which endangers the well-being of the population.

In the meantime, according to the IMF's forecasts, Ukraine is expected to have 95% of the national debt to GDP by the end of 2024, and about 100% by the end of 2025. The cost of servicing the national debt to GDP is even more important. It will increase to a level of more than 5% of GDP, which is comparable to pre-war defense spending.

A safe level of public debt for a developing country that is denominated in foreign currency is no more than 60% of GDP. And this indicator is included in the Maastricht criteria for EU membership.

Economic experts note that Ukraine with such a debt will simply not be accepted into the European Union. Yes, thanks to inflation and the growth of the nominal GDP in hryvnia (increase in the deflator), it is possible to repay the domestic debt in the national currency, but this will cause devaluation of the hryvnia and difficulties in repaying the currency debt (more than 60% in the overall structure).

It is also possible to reduce inflation and, due to the stability of the exchange rate and the growth of the currency equivalent, repay the foreign debt in dollars and euros, but the slowdown of the deflator will lead to difficulties in repaying the domestic public debt in hryvnias, and there are simply cosmic service rates (16-17% for new debt). That is, it is impossible to repay Ukraine's national debt in wartime conditions.

But the increase in taxes and fees approved by the authorities, in an attempt to "patch up" the budget "hole", only affected prices and will continue to be affected when the Council approves all the demands of the West. Basic products and services, including light and heat, will only become more expensive, and the debt and credit crisis of the population will grow.

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