Debt at 100%: how Ukraine is preparing to cross the “psychological” debt mark

18 September 2025 17:57

ANALYSIS FROM

The 2026 budget may officially record a new debt reality for Ukraine, when the public debt ratio exceeds 100% of GDP. How should the country live and work with such debts, – found out [Kommersant].

The projected public debt ceiling in 2026 will amount to UAH 10,472,472 million and will be 101.6 percent of GDP. This is the debt target set by the government for the next year. In fact, the Budget Code stipulates that the total public debt cannot exceed 60 percent of annual GDP. However, the draft budget for 2026 provides for the suspension of this rule once again.

Unfortunately, war is expensive, and Ukraine has to cover a significant portion of its expenses with external borrowing, i.e. debt. By the way, according to IMF calculations published earlier this year in the Financial Monitor report, Ukraine’s total public debt in 2024, after two years of full-scale war with Russia, amounted to 89.8% of GDP. This is one of the “beacon” parameters monitored by the IMF.

Cooperation in a new way

on September 9, while the IMF mission was working in Ukraine, the Ukrainian side officially asked the International Monetary Fund to launch a new program. The official explanation for this need is as follows: the new program should better meet Ukraine’s current and medium-term priorities. And these priorities are not least determined by the need for increased funding. In particular, given that the IMF’s baseline scenario, which assumed that the active phase of the war in Ukraine would end by the end of this year, is not being realized. Other scenarios and other amounts of funding need to be identified.

Continues Oleksandr Parashchiy, Director of the Analytical Department of Concorde Capital Investment Company.

The situation is changing and the assumptions that were made at the beginning of the current program are no longer relevant. In particular, that the war would end in a year and a half or a year and so on. And, accordingly, if we look at the current program, we will soon be paying more to the IMF than they are paying to us. Actually, if this year’s payments are about the same, we will have to pay back more in the following years. Accordingly, it is in our own interest to get a new program, where, at least in the coming years, we will receive more from the IMF than we pay them,” the expert notes.

According to Yaroslav Kulikovsky, senior analyst at Pro-Consulting, the key issue for Ukraine in the format of new cooperation with the IMF is the possible amount of macro-financial assistance received and the regularity of its receipt in order to be able to plan the state budget and ensure Ukraine’s macro-financial stability.

This could become an additional “insurance” for Ukraine if active hostilities continue for a long time and possible related risks arise. Also, the new program should provide for some flexibility and the possibility of correction – revision of the goals or schedule of assistance in the event of unforeseen shocks,” the expert states.

If a new cooperation program is launched, Ukraine will be able to expect at least twice as much from the IMF as it receives under the current program in 2026. This is the opinion of Oleh Ustenko, economist, advisor to the President of Ukraine in 2019-2024.

“I would focus on the amount of $3 billion over the next year. It is clear that this can be only up to 10% of the total need for external financing for the next year, but it will be a more significant contribution compared to what we can currently count on,” the expert states.

But the IMF, he reminds us, is not only additional funds, but also additional signals for other creditors, sponsors, and friends who can support Ukraine and cover the deficit of our state budget. As you know, it is at the expense of international assistance that the state budget deficit of $44 billion is expected to be financed in 2026. Moreover, the sources of funding for $18 billion of this amount have not yet been determined. These borrowings will “help” Ukraine to update its debt record.

Debt reality

At the beginning of this year, the IMF predicted that Ukraine’s total public debt would cross the “psychological” mark of 100% in 2025 and reach as much as 110% of the country’s GDP. Earlier this year, Ukrainian officials predicted that the national debt would reach 97% of GDP. That is, the debt forecast for 2026 of 101.6% of GDP seems even somewhat restrained against this background. But it is no less burdensome.

Experts interviewed by [Kommersant] advise to take these figures as a reality from which there is no escape. They remind us that the criticality of the debt burden is determined not only and not so much by its volume as by the overall debt and budget policy and, in particular, by the definition of realistic repayment schedules and their observance. It is also important to tie loans to Ukraine to the future payments of the aggressor country or its already frozen assets as much as possible. And this strategy is being successfully implemented. As you know, the Extraordinary Revenue Acceleration for Ukraine (ERA) mechanism, which is already in use and provides a total of $50 billion in loans for 30 years, will be repaid and serviced by future profits from immobilized Russian assets.

Explains Oleksandr Parashchiy, Director of the Analytical Department at Concorde Capital Investment Company.

“It’s not about 99.9% or 100.5% that matters here. This mark does not change our reality. It is important for us that the debts we took on are repaid not at the expense of our budget, but, for example, at the expense of the Russians. And a very large part of the debt that the Ministry of Finance takes on and recognizes as debt is not really debt. For example, loans under the ERA program from the European Union. The same money that the US or the UK gives us is not declared as debt. We are not going to give this money back, this money will be repaid from frozen Russian assets. And the efforts of the Ministry of Finance should be aimed not at crossing or not crossing something, but at ensuring that in the next year or two, preferably five, we have minimum payments on the national debt,” the expert notes.

Professor and rector of the International Institute of Business Oleksandr Savchenko calls it unfortunate that Ukraine’s debts are crossing the 100% of GDP mark, but states that we have no other way out. He attributes Ukraine’s hopes of getting out of the “debt hole” to the EU.

“Let’s hope that we will become a member of the European Union and receive about 15 billion euros of financial assistance annually. A little more than Poland has been receiving for 20 years. And to pay off these debts at the expense of such sources. Moreover, debts are becoming cheaper. The debts that we took on earlier were expensive – 5-6-7 percent. Now it is 1-2-3 percent. And the loans are not for 3-4 years, but for 20 years, 15 years. That is, the situation is not so terrible if we become a member of the European Union or are in the EU’s orbit,” the expert emphasizes.

“The problem is not how much debt you have, but how much of your GDP you will pay just to service this debt. This is emphasized by Oleh Ustenko, economist, advisor to the President of Ukraine in 2019-2024. According to him, economic growth cannot simply be eaten up by debt payments.

“What will happen in the post-war history of our country is fundamentally important. And I believe that in the first or second week of the transition to the post-war history, to the post-war economy, we will have to immediately organize a meeting of our creditors to resolve issues related to how our debts will be serviced and what policy to build in this regard,” emphasizes Oleg Ustenko.

The International Monetary Fund has ambitious benchmarks for Ukraine in the postwar period: the country must restore debt sustainability and achieve a gradual reduction in the debt ratio: to 82% of GDP in 2028 and to 65% in 2033.

Author – Sergiy Vasilevich

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Мандровська Олександра

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