Ukraine could go bankrupt as early as next year unless Western countries agree to write off or restructure its debts, an official from the World Bank told TASS on Saturday.
Kiev is reliant on financial aid from its Western backers but foreign support has dwindled in recent months, while a $60 billion US aid package remains stalled in Congress.
The official, who spoke on condition of anonymity, was commenting on the latest $1.5 billion tranche of funding which Kiev received last week under a World Bank program. According to the source, the World Bank’s division representing Russia voted against the loan, citing the organization’s charter.
The draft document on the allocation of the funds “openly” points to the “catastrophic” state of Ukraine’s public finances due to an economic downturn and a reduction in foreign aid, the official told the outlet.
“If in 2025 Western creditors refuse to write off Kiev’s debts, including the debts of private companies and banks, the country could face bankruptcy,” he warned.
The official added that the senior management of the Washington-based financial institution has acknowledged the “extremely high” risks of cooperating with Ukraine, and noted that as with previous transactions, it has not provided its own funds for Kiev. In the latest tranche, the World Bank “once again took advantage” of guarantees from two of Ukraine’s donors – Japan and the UK – the source said.
According to Ukrainian Prime Minister Denis Shmigal, the loan will be spent on social and humanitarian needs as well as on reconstruction. The Ukrainian government expects a record budget deficit of $43.9 billion this year and plans to cover the bulk of it with financial aid from its Western backers.
Last year, former Ukrainian Prime Minister Nikolay Azarov argued that the economic crisis in Ukraine began long ago, and that the country’s bankruptcy had already been recorded. According to Azarov, Ukraine’s insolvency is manifested in its inability to fund its budget, as it relies almost entirely on Western aid.