- Total external debt: $33.3 billion (World Bank, 2005)
- Total external debt payments: $5.9 billion (World Bank, 2005).
- Population: 47.1 million (World Bank, 2005)
- Percentage of adults who can read and write: 99.4% (HDR 2005)
- Average life expectancy: 67.7 years (HDR 2005)
- HIV prevalence: 1.4% (HDR 05)
- Total health spending: 3.7% of GDP (HDR 04)
- Total spending on debt service payments: 6.6% of GDP
- Annual GDP: $89.2 billion (HDR 2005)
DROP THE DEBT FAST
Ukraine is the focus of the Drop the Debt Fast on Wednesday 23 April.
Recent Political History
After five years of dispute over Ukraine, the Soviets eventually gained full control of the country in 1922, and it became one of the original constituent republics of the USSR. In 1991, the country achieved independence from the Soviet Union. Kravchuk became the first President, until he was defeated in 1994. Allegations of corruption plagued his successor, Kuchma, and came to a head in the elections between his chosen replacement, Viktor Yanukovich and former National Bank head Viktor Yushchenko. This led to the so-called Orange Revolution, a peaceful popular uprising that seemed to bode well for the country’s democratic future.
In fact, the unrest has split the country between the Russian-speaking east and Ukrainian west, and made way for a reoccurring political struggle between Yushchenko and Yanukovich, who now serve as President and Prime Minister until the present day.
Ukraine has sought to break its dependency on Russia for natural gas, but has struggled to adjust to consecutive gas price rises in the last few years. There has recently been a stand-off between the two countries, with the Russian energy company Gazprom halving supplies to Ukraine over its refusal to finalise supply agreements and pay $600m in debt.
Where has the debt come from?
Ukraine was economically neglected under Soviet control. An engineered famine killed millions, and the Chernobyl nuclear power plant in 1986 and subsequent state cover-up contributed to the break-up of the Soviet Union and strengthened demands for independence.
The 1990s brought independence, but economic decline. Deep recession included hyperinflation and drastic falls in economic output. A tiny elite siphoned off the country’s natural assets while welfare services collapsed and wages fell. Since 2000 the economy has been growing, but remains in poor condition. The years of recession caused a fall in living standards for most of the population and relatively high poverty levels. Key indicators such as life expectancy and infant mortality rates have actually worsened since independence (UN, 2007). Ukraine has one of the fastest-growing rates of HIV infection in the world.
Thanks largely to its geopolitical position between Russia and Europe, following independence, Ukraine received one of the highest amounts of US government aid in the world, as well as IMF loans. Outside institutions, particularly the IMF, have encouraged Ukraine to quicken the pace and scope of reforms and have threatened to withdraw financial support where these have been lagging.
With economic reforms bringing financial openness, Ukraine saw record levels of capital flows, and a ballooning external debt, in 2007. It remains to be seen how the global credit crunch will affect this emerging economy.
Debt cancellation status
Ukraine is officially classed as a lower-middle income country by the World Bank. It is therefore not eligible for the Heavily Indebted Poor Countries initiative or the Multilateral Debt Relief Initiative. Nor is it eligible for additional debt relief from the UK or other bilateral donors.
The New Economics Foundation calculates that the Ukraine requires 36% debt cancellation in order for the government to meet the basic needs of its citizens, such as health, education and infrastructure, without taxing those living below an ethical poverty line of $3 a day.>> REGISTER FOR THE FAST