This article explains how Ukraine's problems aren't just political, but in fact economical as well. The Ukranian government has issued short-term debt at interest rates as high as 15%. They went under hyperinflation in the early 1990s, and their lack of access to financial markets and massive monetary expansion caused it. In between 1992-2013, Ukraine's real GDP has grown by less than 50%, one of the lowest results in the world, under Turkmenistan, Russia, Tajikstan, and Moldova.
In addition to this, this high inflation damaged Ukraine's export competitiveness. The new currency (hryvnia) drained the central bank's reserves from $40 billion in 2011 to $12 billion today. The black market in Ukraine is over 50% of their GDP, made up of corruption and deceitfulness.
A lot of Ukraine's exports were taken in by Russia, who was doing well backed by high oil prices. During the financial crisis, steel prices decreased significantly, and GDP in 2009 fell by 15%. The International Monetary Fund agreed to loan Ukraine $15 billion in 2010. With cheap gas prices in the country, it discouraged investment, causing one of the most energy-invested economies in Ukraine, two slump by 2/3 since the 1970s. The IMF unfortunately had to freeze the deal in 2011.
To finance their deficit and meet foreign creditors, they need approximately $25 billion this year alone. The government needs to somehow figure out how they can bring in more revenue than their expenditures. Does anyone have any suggestions?
http://www.economist.com/blogs/freeexchange/2014/03/ukraine-and-russia
On Wednesday, Ukraine's acting finance minister said that the country was seeking to restructure its debt but wouldn't default on the foreign-currency bonds it sold abroad. Instead, the minister said Ukraine may try to restructure debt sold locally, or seek relief on its liabilities to the International Monetary Fund.
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