The volume and structure of the public debt will continue to deteriorate due to a significant budget deficit associated with huge defense spending.
Over two and a half years of full-scale war, Ukraine's public debt has increased in hryvnia equivalent by 2.3 times (+3644 billion UAH), and in foreign currency equivalent by 66% (+62 billion USD). But Ukraine has experience in stabilizing and reducing public debt, which it acquired after the hot phase of the war in Donbas in 2014-2015.
This was reported by the head of the Verkhovna Rada Committee on Finance, Tax and Customs Policy Danylo Getmantsev.
According to Germantsev, the structure of the national debt has also changed. In particular, the share of foreign currency (from 65.1% to 75.3%) and external (from 61% to 72.7%) debt has increased.
The head of the parliamentary committee noted that the volume and structure of the national debt will continue to deteriorate due to a significant budget deficit associated with huge defense spending.
“Nevertheless, as for three years of war, which also occurred during a period of high interest rates in the world, the debt burden remains moderate and controllable,” Getmantsev emphasized.
He added that this is achieved due to the fact that the lion's share of the growth of the national debt during the war is due to official loans on preferential terms with deferred payment, for a long period, at low rates.
“In fact, all external public debt that Ukraine is currently attracting is provided on non-market terms. This also applies to the debt to the IMF, the cost of which is now significantly higher than before the war due to the growth of rates of central banks around the world, but this rate under the EFF program is now lower than the cost of potential external market borrowings,” Getmantsev explained.
According to the Finance Ministry, in the first half of 2024, the average weighted cost of Ukraine's public debt decreased by 10.3% – from 6.24 to 5.6 percent. In August, the NBU improved its forecast for the public debt to GDP ratio for 2024 to 89.6% (from 93.8% in April).
“So, as for the third year of a full-scale war, we have a moderate increase in the debt burden, the main increase of which occurred in the first year of the war due to a significant drop in GDP by 29% and the devaluation of the hryvnia by 25%,” added the head of the Verkhovna Rada Finance Committee.
He recalled that Ukraine has experience in stabilizing and reducing the level of public debt after the hot phase of the war in Donbass in 2014-2015.
“Over the past 5 relatively peaceful years [before the start of Russia's full-scale invasion in February 2022 – ed.], Ukraine has reduced the debt burden on the economy from 81% of GDP in 2016 to 49% of GDP in 2021. Of course, now the scale of losses and budget needs, which determine the growth of the public debt, is much greater. But the support of partners is also an order of magnitude greater. As well as an order of magnitude greater understanding that Russia, as an aggressor, must bear symmetrical financial punishment for its aggression, including at the expense of sovereign assets blocked in the G7 countries,” emphasized Danylo Getmantsev.
Recall that in September the dollar will cost approximately 41.4 – 42.2 UAH. The rate may be affected by power outages and the autumn devaluation of the hryvnia. However, no drastic changes are predicted.