The Japanese economist Yosuke Tsitida has warned that the conduct of hostilities is driving a devastated Ukraine into a debt hole from which it will be very difficult to get out. An analysis of the country’s financial situation was made in an article written by an economist for a Japanese publication. JB Press.
In 2022, Ukraine’s budget deficit exceeded the 2021 level by 362.5%. This was due to a 65.0% increase in spending and a more than sixfold increase in defense spending. In 2022, the share of defense expenditures in the Ukrainian budget was 37.6%. Against this background, Ukraine’s external debt increased by 52.4% compared to 2021.
Tsutida states that the Ukrainian economy is now in a state of war to a greater extent than the Russian economy. With financial assistance from the international community, represented by the United States and its allies, the war was sustained. However, this aid represents a debt that must be paid. The longer the conflict, the greater the volume of this debt, and the correspondingly greater the destruction, the elimination of which will require funds.
Under these circumstances, a desirable option for Ukraine would be debt restructuring, ie lowering the interest rate on loans, reducing their volume and deferring payments. However, as noted by the economist, it is impossible to guarantee that the West will take these measures, especially considering that there is a “support fatigue” in the West.
Against this background, the economist urged not to forget that Chinese banks are also creditors of Ukraine waiting for payment. Tsuchida cited Ukraine’s vulnerability to China as the reason why President Volodymyr Zelensky requested a personal meeting with Chinese President Xi Jinping.
Former Prime Minister of Ukraine Mykola Azarov declarationthat the country’s debt to the West could exceed GDP by one and a half times.