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The IMF has grown tired of increasing government spending in Ukraine. The agency had agreed to loan the nation $16.8 billion to offset its large national deficits. It is now withholding the latest $3.5 billion installment. The nation desperately needs the capital. According to The New York Times, “The monetary fund has forecast that Ukraine’s economy will contract 15 percent this year, with inflation running above 16 percent.”

Ukraine does not have access to other capital. The global debt markets will not fund a sovereign government that cannot get money from the IMF and the Ukraine economy is too weak for the country to raise taxes on individuals or businesses.

The events that have caused the IMF to withdraw its support have many of the earmarks of a country about to defer or default on payments for its sovereign debt.

Early this year, a number of global debt experts said that they expected a Ukraine default despite IMF aid. Ratings agencies downgraded Ukraine paper and several capital markets experts said that the nation did not have the resources to cover it bond obligations.

It is too early to say if the IMF loan is absolutely critical to Ukraine fulfilling its sovereign debt obligations. It is too early to say whether the IMF will “blink” and clear the next part of its loan to the country to prevent the global capital markets disaster that could result from a default.

It is clear that the number of nations teetering on the brink of failing to make payments on their debt is rising.

source HERE