Ukrainians struggling as their economy shrinks

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Media captionYulia Burda run a speech therapy centre near Kiev

Many Ukrainians are feeling the effects of their country's severe recession. Fuelled partly by the debilitating war in the east with Russian-supported militants, Ukraine's economy is shrinking.

The country may also be on the verge of defaulting on some of its international debts.

This week, Ukraine's Prime Minister, Arseniy Yatsenyuk, has been in the United States to reassure Washington that the government is making progress in tackling the troubled economy, cracking down on corruption and dealing with the shaky cease-fire with the insurgents.

But for many ordinary Ukrainians, life is hard. On the outskirts of Kiev husband and wife team Andrei and Yulia Burda run a speech therapy centre, a non-profit organization they founded for children with special needs.

It's a modest operation occupying just two small rooms in the corner of a school, and Andrei and Yulia make do with contributions from the 20 families whose children they help.

With this they pay the rent and buy some basic, inexpensive items to assist them in their work - as well as a Bassett Hound puppy named Bobby.

At home they are equally frugal. With their two daughters and Andrei's mother, they rent a small one-bedroom flat near Kiev's centre. Together they make plaster of Paris figures and cloth dolls that they sell at a local art fair. Andrei also provides a dog grooming service for Yorkshire terriers.

But for all this penny-pinching, Yulia says they're just getting by.

"We can't afford to go to places with our children - to the shopping mall, the zoo or the circus - because it's so expensive," she says.

Image caption "What you paid for sausage or cheese for one kilogramme before, now buys 100 grams," says Yulia

With the collapse in the value of the national currency, the hryvnia, after the central bank signalled it would no longer intervene to support it, and rocketing inflation - Yulia says they face tough choices over what to buy.

"We can't afford medicines that we need. Because if we buy medicine, then for a period of time we can't buy food.

"Whenever you go into a store or to the market, you can't believe your eyes. Because what you paid for sausage or cheese for one kilogramme before, now buys 100 grams."

Default risk

The difficulties Yulia and her family are experiencing are mirrored across Ukraine, the economy is in the grip of a severe recession.

Gross domestic product is predicted to drop by 10% this year, after a 7.5% fall in 2014. Inflation is running at 57%, the world's third highest by some estimates after Venezuela and South Sudan.

On top of this, Ukraine is facing a day of reckoning with international creditors in just a few days - earning it comparisons with the situation in Greece.

24 July is the deadline for President Petro Poroshenko's government to pay an interest payment of $120m on its international loans. If officials fail to do this, Ukraine will default.

Image caption Andrei and Yulia earn a little extra by selling homemade dolls and figurines at a local craft fair

Kiev is currently in negotiations with a consortium of international lenders who hold some $9bn out of Ukraine's outstanding debts of $19bn.

Ukraine is proposing a 40% reduction or "haircut" on this amount. The consortium, led by the US-based Franklin Templeton, is resisting any discount, and instead is offering to prolong the period of re-payment.

While the $120m sum is not huge, Ukraine would prefer not to pay it to avoid any depletion of its already precipitously low hard currency reserves, and so not to show any weakness in the negotiations.

To this end, Ukraine's parliament voted in May to give the government authorisation to impose a "moratorium" on all international payments, if necessary.

What will happen if Ukraine defaults on its loans is unclear. Natalie Jaresko, Ukraine's Finance Minister, says the impact on the economy would be minimal, and could in fact help the debt talks.

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Image caption Economic reform will ultimately benefit ordinary Ukrainians, says Finance Minister Natalie Jaresko

"It's my belief that if we were to use this tool, that it would be temporary, and that it would only be used to continue and accelerate the discussions, and not for any other reasons," she says.

Ms Jaresko also plays down any comparisons to Greece.

"I'm glad we're not Greece. I'm glad our situation is completely different. In Greece it has more to do with their rejection of reforms."

Indeed, Ukraine's parliament passed a series of laws last week that the International Monetary Fund required, before it would release a $1.7bn tranche of a $17bn bail-out programme.

'The economy is falling apart'

But with a deteriorating economy, there is rising anger among the population. A recent opinion poll by one of Ukraine's leading research companies suggests that discontent with President Petro Poroshenko and his prime minister has sharply increased.

Ms Jaresko says she recognizes the difficulties that many people are experiencing and the pain some of the reforms are causing - such as raising the price of utilities - but she maintains this is temporary.

"When the average citizen says typically that they don't see the effect of these reforms, that's not untrue. But it's not unexpected. The result from the reforms will show up in their pocketbooks six, nine, twelve months from now."

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Image caption A recent opinion poll suggests discontent with President Petro Poroshenko (centre) and Prime Minister Arseniy Yatsenyuk (right) has sharply increased

But for some, three months is a long time.

Yulia Nogina is the director at Uke-Pol a Kiev company that produces flavoured gelatin. Because of the economic situation demand for some of its products has dropped by 70% - and for others, disappeared completely.

In their place her team has come up with cheaper products, which have so far filled the gap. But if prices continue to rise - forcing customers to focus more on purchasing the basics and stop buying even its less expensive products - then the company would be forced to close, she says.

"We're hoping that all these huge jumps and changes will be for the better, but right now I'm not happy because there's a war in the country, the economy is falling apart," says Yulia.

"So far, there's nothing good happening."

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