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Congrats American taxpayer, you are on the the hook to pay Ukraine $100 Billion in bail out funds

When April 2015 rolls around it would be nice to ask American taxpayers if funding an illegal coup and propping up of a fascist government in Ukraine was worth the tax hit to their personal income.

From the Hill:

For at a time when the International Monetary Fund (IMF) is estimating that Ukraine might need at least an additional $19 billion of external official support to see it through 2015, the White House has agreed to provide Ukraine around an additional $50 million in assistance. This leaves unanswered the basic question as to from where the remaining $18.95 billion is to be obtained. One would have thought that this question would have been the main topic under discussion during Poroshenko’s U.S. visit. This is particularly so considering the very magnitude of the official external support that Ukraine might require to keep its economy afloat and considering that one way or another, the U.S. taxpayer is going to be on the hook for at least a part of this assistance.

The question of Ukraine’s external financing needs is all the more important given that it is all too likely that the IMF is lowballing Ukraine’s needs in much the same way as it did in its Greek bailout program. Last May, at the time it launched its Ukraine lending program, the IMF estimated that Ukraine might need around $35 billion in official external support. Today, some six months later, it is estimating that Ukraine might need around $55 billion in official external financing. If the repeated upscaling of the financing needs of the IMF-EU Greek bailout program is any precedent, one should not be surprised if the total official bailout cost for Ukraine came closer to $100 billion rather than the $55 billion that the IMF is now estimating.  Sadly, there are all too many reasons to think that the external official cost of keeping the Ukraine economy afloat will indeed turn out to be very much higher than the IMF is estimating. As eastern Ukraine is still troubled and as Russia shows no sign of backing down in its efforts to destabilize Ukraine’s economy, can we have any confidence that the Ukrainian economy will only decline by 6.5 percent in 2014 and then actually start recovering in 2015 as the IMF is currently predicting? Is it not conceivable that Russia will use its natural gas weapon to truly sink the Ukraine economy and to increase its borrowing needs this winter by cutting off natural gas flows to Ukraine? Might the cost of defending Ukraine against Russian incursions not increase Ukraine’s defense expenditures well beyond what the IMF is currently estimating? And might not further currency weakness raise the cost of bailing out the Ukrainian banking system, which has a large currency mismatch on its books?

References:

http://thehill.com/blogs/pundits-blog/finance/218718-is-ukraine-another-bottomless-pit

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