The price of debt: how much does it cost Ukraine to repay its debts?
8 January 16:12
ANALYSIS FROM 
Ukraine is entering the new year 2026 with a national debt that is hovering at a rather threatening level of 100 percent of GDP. Komersant investigated how critical this debt burden is for the country.
The maximum amount of public debt for 2026 has been set by Ukraine’s state budget at 10,477,835,377.4 thousand hryvnia, which will amount to approximately 101.5% of gross domestic product. The International Monetary Fund was less optimistic in its October forecast last year, setting a target of 110.4% of GDP for Ukraine this year.
However, this forecast also contains several points that sound more reassuring for Ukraine. The IMF, for example, pointed out that in many of the world’s largest economies, public debt is also approaching or exceeding 100% of GDP, and that more than 55 countries are experiencing a debt crisis or are at high risk, even though their debt is below 60% of GDP.
As Viktoria Klimchuk from the Center for Public Finance and Public Management at the Kyiv School of Economics explained in a recent interview with our publication, Ukraine’s public debt is primarily a consequence, not a problem in itself. According to her, the increase in Ukraine’s public debt is currently the result of a growing need for finances to fight Ukraine’s war and rebuild the country, which is offset by active involvement of international financial assistance and domestic borrowing. Moreover, the size of public debt alone is not an exclusive indicator of the scale of the problem. Analyst Victoria Klimchuk continues.
“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: the determination of realistic repayment schedules and their adherence, close communication with creditors, forecasting of budget revenues that will be directed to servicing the national debt, etc.,” explains Viktoria Klimchuk.
And, by the way, according to IMF expectations, after peaking in 2026, Ukraine’s public debt will begin to gradually decline.
Debt structure
The Ministry of Finance of Ukraine acknowledges that the volume of public debt has grown significantly and explains this by a substantial increase in state budget expenditures on defense caused by the full-scale war. The main goal of public debt management at the Ministry of Finance is to minimize the long-term risks of such growth. For example, the refinancing risk is expected to be reduced by extending the maturity of government bonds, attracting preferential resources, and conducting debt management operations. The currency risk, which remains significant due to the high share of foreign currency debt, will be overcome by gradually increasing the share of hryvnia borrowings. These and other measures are set out in the Medium-Term Public Debt Management Strategy for 2026–2028, approved by a government decision at the end of December 2025.
As noted in the document, Ukraine’s current debt structure reflects the war conditions and significant international support in the form of concessional borrowing.
“As of June 2025, external debt stood at 75%, while domestic debt stood at 25%. Most of the liabilities are concessional loans from the EU, international financial organizations, and partner countries, while market instruments currently account for less than a third of the debt. The share of euro-denominated debt has increased significantly since 2021, driven by EU financing. Interest rate risk remains low due to the high share of fixed-rate debt, which ensures stability and predictability of debt servicing during the war. The average debt maturity has increased to approximately 12 years, compared to approximately 6 years before the start of the full-scale war, which is ensured by long-term concessional loans and the restructuring of Eurobonds in 2024,” the Strategy states.
Oleksandr Paraschiy, director of the analytical department at investment company Concorde Capital, also draws attention to the importance of the fact that the repayment of a large amount of debt has been postponed.
“If we look at the debt repayment schedule, it is now even less stressful for the next few years than it was before the war. At least in terms of international debt, we are paying even less than before the war. Our main creditors have, in fact, already made concessions and allowed us to restructure our debts, reduce payments, and extend them, i.e., defer them. The new loans we have taken out in the last 3-4 years have very, very long repayment schedules, and in fact, we are paying almost nothing on them now,” the expert explains.
According to the Ministry of Finance, significant payments on Ukraine’s national debt were due in 2025, and a gradual decrease is expected between 2026 and 2028.
The price of debt
There is another criterion that is important for assessing a country’s debt burden. As economist Oleg Ustenko explained in a comment to the publication, “the problem is not how much debt you have, but how much of your GDP you will have to pay just to service that debt.” According to him, economic growth should not simply be eaten up by debt payments.
So, according to the Public Debt Management Strategy for 2026–2028, the total amount of state expenditures on debt repayment and interest payments in 2026 will be UAH 1.17 trillion, in 2027 – UAH 1.26 trillion, and in 2028 – UAH 1.29 trillion. On average, according to the Ministry of Finance’s calculations, the state will spend UAH 1.193 trillion per year on debt servicing and repayment, or about 10.4% of the country’s expected GDP.
And most of this amount will be directed towards servicing and repaying domestic public debt, i.e., payments on domestic government bonds. Alexander Paraschiy, director of the analytical department at investment company Concorde Capital, explains.
“The situation with domestic government bonds is as follows: we are constantly paying off debts, and at the same time, the Ministry of Finance is taking on new debts, i.e., there is a so-called “rollover” — we repay some debts and take on others. And, unfortunately, there is an interest burden. We see that every year, the budget allocates more money for debt servicing. And for the most part, this servicing is for these OVDPs, domestic debt, not international debt,” the expert notes.
But it is not only the holders of domestic government bonds that are a priority. Payments to the International Monetary Fund are also strictly on schedule. Oleksandr Parashchiy continues.
“In fact, our largest debt payments are to the International Monetary Fund. Although the IMF is certainly not our largest creditor, it is the only creditor to whom we pay everything on time and without any disruptions to the schedule,” the analyst notes.
Moreover, Ukraine has recently been returning even more funds to the IMF than it receives from it. But the benefits of cooperation with the International Monetary Fund are not measured solely by the cost of loans. In return, the country effectively receives confirmation from the IMF that it is possible to work with it. This is important for the EU and other major Ukrainian creditors.
Author: Serhiy Vasilevich
