The Humane Thing to Do Is to Let Ukraine Default - Russia Insider

Ukraine is a big country. After Russia it is the second largest in Europe. It is also a very populous country. It numbers 45 million people. I'm told that is more than lived in the entire Roman Empire.

In economic terms, however, Ukraine is sadly a minnow. Its GDP is about $180 billion.

In other words, its economy is smaller than that of Peru, Romania, Kazakhstan, Portugal and Greece — all of whom have far smaller populations and none of whom are known for exceptional wealth.

Ukraine’s budget in recent years has hovered at just under $60 billion. That is a small number.

Primarily due to a drastic fall in the exchange rate of its currency, its 2015 budget only amounts to $30 billion.

By comparison Slovenia is a post-Communist country in Central Europe of 2 million people. It has a budget of $20 billion.

Russia’s 2015 budget is $390 billion (3-4 times Ukraine’s population but 12 times the budget).

Complete story at - The Humane Thing to Do Is to Let Ukraine Default - Russia Insider

Mish's Global Economic Trend Analysis: Graves Waiting For Bodies: Major War Escalation in Ukraine

We regret having to interrupt feel-good weekend articles with more sobering news. In Ukraine, major battles have broken out over the past couple weeks.

Mainstream media has widely ignored the story because of Greece, then Charlie, and then the Swiss Franc. And of course Western media has no interest in reporting news the rebels are winning.

However, ignoring the story does not make it go away.

Major Rebel Advance

On November 9, 2014, I posted Ukraine Split in Two; Expect Major Rebel Advance.

That advance came later than I expected. But it is here in full force.

Max Keiser provided this accurate headline two days ago: Ukraine Lurches to Full Scale War as Russia Drastically Reduces Gas Supply to EU.

Reader Jacob Dreizin, a US citizen who speaks Russian and reads Ukrainian sent a few emails and videos recently worth posting.

From Jacob ...

Hello Mish

Here's a video that shows a military "cemetery" in Dnepropetrovsk region, Ukraine. Note especially seconds 33 through 51. There are literally hundreds of empty holes in the ground here, waiting for bodies. I read in another source that these graves were dug very recently, probably right before this video was posted on January 8th. Looks like Kiev had been planning an offensive, presumably the one that was just broken up by the rebels in the last few days. I guess it's cheaper to have the graves dug all at once than to keep calling the backhoe crew over and over.



Complete story at - Mish's Global Economic Trend Analysis: Graves Waiting For Bodies: Major War Escalation in Ukraine; In 5 Weeks Ukraine Out of Money

Ukraine currency, sovereign woes to push more and more firms into default | Ukraina.ru

With an economy in meltdown, a currency that has tanked 45 percent and a possible sovereign default ahead, more and more of Ukraine's companies are finding themselves unable to repay overseas debt

While a relatively modest $12.4 billion in private sector debt falls due in 2015, according to International Monetary Fund estimates, it still exceeds Ukraine's total hard currency reserves and is double what the government owes foreign creditors next year.

Many companies and banks have already fallen behind on debt payments. Metals firm Metinvest for instance last week swapped 2015 dollar debt for bonds maturing at the end of 2017, and agricultural producer Agroton asked bondholders' consent to hold off next year's coupon payments until 2016.

Agro firm Mriya, pipe manufacturer Interpipe and banks First Ukrainian International Bank, VAB, Nadra, and Finance and Credit Bank are also in trouble.

Bonds of all these companies have fallen sharply, with the Agroton issue for instance now valued at 25 cents on the dollar and Mriya's 2016 bond at 15 cents.

And as company after company reports steep falls in revenues, investors are bracing for more trouble ahead.

"I think that almost all the Ukraine corporate sector will restructure," said David Spegel, head of emerging debt at BNP Paribas.

Complete story at - RPT-Ukraine currency, sovereign woes to push more and more firms into default | Ukraina.ru

Russian news: The Experts Agree - Ukraine's Economy is in Cardiac Arrest - Russia Insider

"Unless actions are taken pretty soon, the odds of Ukraine falling into financial and economic collapse are very, very large," said Lubo Mitov, chief economist of the Institute of International Finance.

Over the next six months, Ukraine needs $10 billion to $15 billion more than what has been promised by international organizations such as the International Monetary Fund, the IIF said. Without an injection of cash soon, "people will start freezing in the winter," because the country won't have the cash to pay for natural gas.

Between this year and next, the IIF expects the Ukrainian economy to decline by at least 20 percent, causing a huge drop in tax revenue. The steep decline is expected in part due to the loss of eastern Ukraine to militant separatists that are widely believed to receive support from Russia.

Mitov dismissed Ukraine's better-than-expected 5.1 percent economic contraction in the third quarter of this year, saying that hard data related to industrial production, exports, tax revenue and real incomes are registering "double-digit declines."

Complete story at - Russian news: The Experts Agree - Ukraine's Economy is in Cardiac Arrest - Russia Insider

Russian news: Ukraine Braces for Default - Russia Insider

The International Monetary Fund faces a fresh debacle as Ukraine burns through an $17bn rescue package agreed in April and spirals into a full-blown currency crisis, with credit markets already bracing for likely default.

The country's foreign reserves have dropped to $12.6bn, barely enough to cover six weeks worth of imports. Its currency has been in freefall since it became clear that the Minsk ceasefire deal with rebels in the Donbass region was breaking down.

The Hyvrnia has crashed 20pc against the dollar over the past week and has lost almost half its value this year, making it much harder for Ukrainian companies, banks and the state to service $60bn of foreign debt, mostly in dollars.

The economy is expected to contract by 10pc this year, twice what the IMF expected when it first approved the bailout. Ukraine still has another $10bn of IMF aid to come but the pace of disbursements is too slow to keep the country afloat.

Ukraine is in such dire straits that officials are holding back on pre-payments to Russia for gas imports, keeping their fingers crossed that the warm weather will last long enough for Ukraine to make it through the winter, relying on gas stocks and limited flows from Slovakia and Poland through “reverse pipelines”. This is a risky strategy since climate experts are predicting the coldest winter in more than 30 years.

Complete story at - Russian news: Ukraine Braces for Default - Russia Insider

Ukraine moves step closer to default - Fitch — RT Business

The Fitch ratings agency has downgraded Ukraine one step closer to default grade, as the Ukrainian currency the hryvnia hits a record low, and the economy balances on the brink of a collapse.

Fitch cut the long-term local currency Issuer Default Rating (IDR) of Ukraine from B-,signifying a default risk, to CCC, where default is a real possibility, and affirmed its long-term foreign currency IDR at CCC, it said in a statement on Friday.

The downgrade came amid deteriorating economic outlook due to the ongoing military conflict in Ukraine.

“Although the government has recaptured territory from the rebels, conflict may persist or intensify, delaying economic revival and damaging productive assets,” says Fitch’s statement.

The Ukrainian currency has lost 39 percent against the US dollar this year, on Friday reaching an all-time low at 13.7 hryvnia to the dollar. Last week the hryvnia lost 3.1 percent, while in August the currency fell by 9.4 percent.

Complete story at - Ukraine moves step closer to default - Fitch — RT Business

Moody’s downgrades Ukraine to ‘default imminent’ — RT Business

Moody's Investors Service has downgraded Ukraine's government bond rating one notch from Caa2 to Caa3, citing the current political crisis and deepening economic instability as reasons for its negative outlook.

The Caa rating is a credit risk grading pertaining to investments that are both very poor quality and entail a high credit risk. The current downgrade drops Ukraine from Moody's "extremely speculative" rating to "default imminent with little prospect for recovery."

Moody’s said the downgrade was driven by three factors, which “exacerbate Ukraine's more longstanding economic and fiscal fragility.”

The first factor is Ukraine’s political crisis, citing the recent regime change in Kiev and subsequent events in Crimea. The agency went on to cite Ukraine’s stressed external liquidity position, which faces continued decline in foreign currency reserves, the withdrawal of Russian financial support and a spike in gas import prices. Moody’s further noted that this assessment accounts for the near-term liquidity relief recently hammered out with the IMF. Finally, due to a “sizable fiscal deficit,” the agency expects a significant contraction of GDP and a sharp currency depreciation as the debt to GDP (Gross Domestic Product) ratio hits between 55-60 percent by year’s end.

On Thursday, Gazprom CEO Aleksey Miller announced Ukraine would begin paying $485 per thousand cubic meters of natural gas starting from April. The price rise followed a cancelation of the Black Sea hosting deal. On Wednesday President Vladimir Putin signed a federal law ending Russia’s commitment to the Kharkov Agreement, as the Black Sea port of Sevastopol is now under jurisdiction of the Russian Federation. This follows another steep hike on April 1, when the price Ukraine paid for gas went up 44 percent to $385, after Kiev failed to meet its debt repayments.

Last December, Russia offered Ukraine’s Yanukovich-led government a $15 billion loan and a 33 percent discount on natural gas: a lifeline to help its faltering economy. Moscow went through with the purchase of a $3 billion Eurobond from Kiev, though Russia later froze both the gas deal and the credit- line, due to events on the ground.

   

Complete story at - Moody’s downgrades Ukraine to ‘default imminent’ — RT Business

Without reforms Ukraine to default in 2014 — RT Business

Kiev must impose tough reforms and austerity, otherwise even with billions of dollars of aid Ukraine will default in 2014, the coup-imposed Prime Minister Arseniy Yatsenyuk warns. It comes after the IMF agreed a bailout package worth up to $18 billion.

“Our forecast predicts a 3 percent drop in GDP, provided we pass the stabilization package of laws the government proposes. If the laws are not passed, we forecast a default, and a 10 percent drop in GDP,” Yatsenyuk told the parliament on Thursday.

Ukraine will be short about $28 billion in 2014 due to a ballooning fiscal deficit. The country will also see inflation of 12 to 14 percent, depending on how much the national currency devalues, Yatsenyuk said. The government is not planning to raise minimum wages in response to inflation.

Ukraine's national debt has climbed to $75 billion, which is 53 percent of the country's GDP, the coup-appointed PM said.

The government's solution to the looming default is to cut budget spending, raise taxes on agriculture and oil and gas companies, as well as introduce a progressive scale for income tax. Excise taxes for tobacco and alcohol will also rise.

  

Without reforms Ukraine to default in 2014 — RT Business