Public debt of Ukraine, military-political shocks, fiscal sustainability, currency devaluation, external borrowing, debt-to-GDP ratio, budget deficit, international financial assistance, debt spiral
Abstract
The ongoing full-scale military aggression against Ukraine has triggered unprecedented shifts in the global financial architecture and national fiscal policy. As the war persists, the management of public debt has transformed from a purely economic issue into a critical element of national security and international relations. Methods: This study employs a systemic-structural analysis and comparative statistical methods to evaluate the transformation of Ukraine’s public debt portfolio between 2021 and 2026. The research integrates data from the Ministry of Finance of Ukraine, IMF reports, and UNESCO infrastructure loss assessments to identify the correlation between military shocks and debt sustainability. Results: The research identifies that military-political shocks act as multi-layered exogenous factors that simultaneously escalate public spending and diminish revenue streams. Key findings indicate that the "crowding-out effect" has prioritized defense and social resilience (IDP support), while the destruction of scientific and urban infrastructure has necessitated massive external funding. The study reveals a significant shift in debt architecture: the foreign-currency-denominated debt increased to 75% of the total portfolio by 2025, with a predominant share of loans from the EU and international financial institutions. Discussion: The paper highlights the emergence of a "debt spiral" exacerbated by the devaluation of the national currency (hryvnia). With the debt-to-GDP ratio surpassing the critical threshold of 100% (101.25% in 2025), the cost of debt servicing has escalated sixfold compared to 2022. The study argues that the high reliance on external creditors creates a derivative dependency that limits the fiscal space for post-conflict reconstruction. Conclusion: To ensure long-term financial stability, Ukraine must transition from a loan-based support model to a grant-based framework. Strategic recommendations include proactive debt restructuring, currency risk mitigation, and the implementation of war-risk insurance to stimulate the return of private investment.
Author Biographies
Alla Zhemba, National University of Water and Environmental Engineering, Rivne
Candidate of Economics (Ph.D.), Associated Professor
Oleksandra Tarara, National University of Water and Environmental Engineering, Rivne
