Temporary Financial Stabilization Will Bring Tragedy

Sachs maintains that the half-way character of reforms has worsened the situation in Ukraine from what earlier forecasts predicted. Foreign investors, who trusted in planned economic reforms, invested heavily in Ukrainian government bonds. Now huge government debts, combined with distrust in the government itself, has brought the nation's financial system to near collapse.

Meanwhile, Prof. Sachs is convinced, that stable Ukrainian currency can no longer serve as the basis for macroeconomic stabilization. In his opinion, Ukraine today lacks the conditions for a strong currency. High loan interest rates and the sharp rise of returns on OISBs up to 50%, helped to undermine the stability of the national currency and to kill the budget, and, on the other hand, signal high inflationary expectations and distrust in the economic policy as a whole.

Prof. Jeffrey Sachs is Director of the Harvard Institute of International Development, Professor of International Trade at Harvard University, and corresponding member of the US National Bureau for Economic Research. He is counselor to a group of countries of Latin America, Eastern Europe, the former Soviet Union, and Asia. In the past he also worked as consultant to the IMF, World Band, OECD, and the UN Development Project. The New York Times Magazine recently stated that Sachs may be the most influential economist in the world today.