Lawmaker predicts technical default, "apocalyptic scenario" for Ukraine in 2021

Deputy head of the Ukrainian parliament's committee on finance, tax and customs policy Yaroslav Zheleznyak, a member of the Holos (Voice) parliamentary faction, says that if Ukraine is unable to repay US$3 billion in debt in September next year, the country will face a technical default and there is an "apocalyptic scenario" looming.

"If in September 2021 we are unable to repay US$3 billion ... if we do not pay off the debts, then there will be a technical default. To be immediately followed by an apocalyptic scenario, which, in fact, is typical for the entire current political cycle in all areas, in particular, in the financial one," he said in an interview for the media outlet lb.ua.

He predicts that economic problems in the country will aggravate by September 2021.

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"If we do not get a disbursement from the IMF, it will be a disaster. After all, the Fund's tranche is not just money, but also a signal to everyone else that it is possible to invest in this country stably. If this signal is not received, in the face of the need to pay off the debts, it will be a huge problem for Ukraine. There will immediately be a real threat that the incumbent government will be toppled, there will be sequestrating [assets], and so on. As well as major political upheavals. And yes – all this is quite real," he said.

According to the lawmaker, the Cabinet of Ministers under such conditions does not solve problems, but only postpones them.

"This happens systematically with customs, tax revenues, with privatization receipts ... Everything is like a snowball. And at some point it will be impossible to jump over that snowball. Sooner or later, this power will simply fall face down into all this snow," he said.

Zheleznyak considers the draft budget for next year to be "conventionally bad."

"There are significant remarks as for the inflated deficit and unrealistic methods of covering it. Secondly, this 'brilliant' idea of raising the minimum wage. This is a very bad idea from all points – from the economic point of view, and people will not get it. As a result, more taxes will be paid... I know that many of my colleagues, even from the coalition, went and asked to give it up... but in the end, most of the lawmakers were like those hedgehogs – with tears in their eyes, they continued to climb the cactus," he said.

Zheleznyak also criticized an increase in spending foreseen in the 2021 draft budget on the President's Office and other governmental institutions.

Draft budget 2021: Key points

• The draft national budget for 2021, which was approved by the Cabinet of Ministers on September 14, 2020, provides for revenue at UAH 1.07 trillion (US$38 billion), while spending at UAH 1.35 trillion (US$47.4 billion). The deficit is expected to be 6% of GDP next year. The budget deficit is capped at UAH 270 billion (US$9.5 billion).
• The national budget draft also envisages UAH 104 billion (US$3.6 billion) in benefits and subsidies. In total, social expenditures stand at UAH 323 billion (US$11.3 billion).
• The bill on Ukraine's national budget for 2021 passed its first reading in the Verkhovna Rada on November 5.