Ukraine is 76th in the global competitiveness ranking

Ukraine may reenter the international sovereign debt market as soon as September 2014. It would seem less than pleasant news for Ukrainian taxpayers, if only because the government needs the money to cover a shortfall in external financing. As emphasized in the materials of the International Monetary Fund (IMF), the shortfall is estimated at 1.1 billion dollars in the next 12 months, while closer to the end of 2015, the IMF estimate has Ukraine needing additional external financing to the tune of 2.4 billion dollars.

The IMF technical memorandum explains that the 2014 shortfall, absent in previous estimates made in the course of work on the stand-by program for Ukraine, appeared due to problems with getting financing from the European Investment Bank and the European Bank for Reconstruction and Development. Their contributions have significantly decreased, as well as ones of donor countries (the latter reduced their share to 100 million dollars instead of the originally expected 300 million dollars).

Let us recall that the international debt market was virtually closed to our country in recent years. Still, Ukraine was able to place one billion dollars in five-year Eurobonds in mid-May at a very low interest rate of 1.844 percent per annum due to a guarantee provided by the US. Should the September loan be placed under the same conditions, it would be great. After all, the whole world knows about huge economic losses caused to our country by the war in the Donbas.

At the same time, September 3 saw the world getting also a positive signal about the situation in our country that can contribute to the success of the September loan. While Ukraine dropped by 11 positions in the Global Competitiveness Index of the World Economic Forum in 2013, we have been able to climb by 8 positions this year, reaching the 76th place out of 144 countries (last year Ukraine was 84th among 148 nations).

Authors of the study note that this rise may reflect the expectations associated with the new government after the Euromaidan. In their view, progress was achieved by a more positive perception of institutions and market efficiency and better results in education. They make clear, however, that the conflict in the eastern part of the country and in Crimea had little influence on the results, because the data were already collected by the time. “At the time of writing, restoring peace in eastern Ukraine is undoubtedly the country’s highest priority,” the authors of the report stress. “However, far-reaching reforms will be necessary in order to put economic growth on a sustainable footing.”

Will Ukraine succeed in placing the September loan on the global financial markets? Answering this question, member of the supervisory board of the International Center for Policy Studies, Ambassador Extraordinary and Plenipotentiary of Ukraine Viktor Mashtabei told The Day: “Ukraine’s entry to the international debt market was expected. With the help of third parties, including the US, this placement, of course, can succeed. However, when thinking in terms of our businesses’ quotations at, say, Warsaw or London stock exchanges, the situation looks less favorable. Hence, if a guarantee is provided, I see no good reasons not to take a loan at a low interest rate. Moreover, it is absolutely clear that we need it. Improving competitiveness, or rather our position on the index of it, is a more abstract thing. Switzerland and Singapore have held top places on it since its introduction, but we must understand that theirs are stable economies. The fact that we have slightly improved our position gives us, of course, some moral satisfaction and understanding that we are moving in the right direction internationally. Still, our prospective creditors see the trade deficit as a more important issue...”