The Ukrainian-Russian conflict in 2014 took its toll on the economy of Ukraine which suffered inflation, a drop in GDP, and many other economic hardships, besides the human suffering that kept Ukraine in suspense for more than a year.
Ukraine’s GDP fell by 10% in 2015 and is slowly climbing back. The national currency, hryvnia did not fare better as it dropped by astonishing 50% against the dollar. The central bank also had to lift the rates multiple times as inflation was at 19%.
The IMF Bailout
The IMF ran to rescue when Ukraine was in crisis by providing it, during its toughest days, with a $17 billion two-year plan that was supposed to keep the country afloat. Western countries also joined the rescue action with smaller amounts to provide financial support to economically-stricken Ukraine. Nevertheless, Ukraine needed and needs more than an IMF loan which was only a temporary solution.
The Long-lasting Economic Ordeals
After the collapse of the Soviet Union, Ukraine had great potential to build a market-free economy, but yet the country and its authorities have not adopted the necessary reforms and measures which would provide a solid basis for economic development. A rigid government and over 20 years of obstructing reforms, the government accounted for a 20% GDP drop per head, leaving the citizens poorer than when they were under Soviet rule.
The privatization process of state-owned institutions and companies after the Soviet collapse did not produce the needed results as it was not conducted in an efficient manner. Powerful and wealthy individuals used it as an opportunity to get a big slice for themselves without having any public interest. The economy was and is affected by a high percentage of corruption which hampers additionally hampers the economy.
A stronger legislation and its implementation scheme are required in order to stop business owners from evading taxes by paying part of their employees’ salaries in cash which significantly hurts the state budget. Also, a stronger regulation to tackle black market activities is needed to start growing economically strong eventually.
Public debt, even though it increased in the last ten years, is not as bad as it was in Greece, so the country has good odds to repay its debts steadily. Still, Ukraine has to do something to keep foreign investments coming to the country in order not to run out of funds the country needs to service its debts. There are many aspects the Ukrainian government has to work on, and the authorities have to show more willingness to introduce a long-term economic program.