AFP, Washington :
Ukraine needs outside aid immediately to avoid a collapse of its financial system and economy, a world banking group said yesterday.
“In order to avoid a complete collapse in the coming, I won’t say month, even weeks, Ukraine needs money now,” said Lubomir Mitov, chief economist for emerging Europe at the International Institute of Finance (IIF), which represents some 450 major banks around the world.
“The economic challenges are just formidable…. The state coffers are empty,” he told journalists.
With finance chiefs from Europe, the United States and the International Monetary Fund discussing how to help the country past its political turmoil, Mitov argued that there is little time.
Customers are already pulling money out of the banks, which lost three to four percent of their deposits in the first two weeks of February, he said.
The risks of a run on the banks “are real,” he stressed.
Ukraine’s new leaders, taking control after ousting president Viktor Yanukovych, called on the West Monday to help the country raise $35 billion to stave off default on its debts.
According to the IIF, the country’s foreign reserves have fallen to $12 billion from $16 billion at the end of January. Meanwhile the country faces debt payments of $25 billion just this year.
“The fiscal situation is so desperate that the only way for the government to pay pensions and wages is to print money,” Mitov said.
But that will add to inflation and send the hryvnia, Ukraine’s currency, tumbling further.
The IIF said Ukraine has little choice but to accept the conditions for reforms that will be required by the European Union and the IMF in exchange for emergency financial support.
Such reforms, already suggested, include doubling the local price of natural gas and slashing the country’s fiscal deficit.
