Ukraine’s Debt Security: An Assessment of the Current Situation, Risks, and Development Scenarios

Анотація

The full-scale war has caused profound transformations in Ukraine’s financial system, leading to an extraordinary increase in government expenditures, primarily in the defense, security, and social support sectors. Faced with a reduction in domestic revenues and economic activity, the State has been largely forced to rely on external financing to cover its core needs. This growing dependence on international loans and grant assistance, while critically necessary for the functioning of the State, nevertheless threatens long-term financial security and increases the risks associated with the volume and structure of public debt. The aim of the study is a comprehensive assessment of Ukraine’s debt security status under martial law, determining the extent to which current values of debt security indicators allow the State to maintain financial stability and fulfill its obligations without creating critical risks, and modeling using scenario forecasting the projected trends of the integral debt security indicator in the medium term. To achieve this goal, the work employs a combination of methods: system-structural analysis – to study the components of debt and calculate the integral index, as well as a scenario approach – for strategic forecasting. The article analyzes the dynamics and structure of public debt over the period 2013–2023. A cyclical nature of debt burden has been identified: from the crisis peaks of 2014–2015 to the stabilization period of 2016–2021 and a repeated transition to a high level with the beginning of the full-scale invasion. It has been found that as of 2023, the integral indicator of debt security has significantly decreased, indicating its substantial vulnerability, despite improvements in certain indicators. Special attention in the study is given to forecast modeling for the period 2024–2027. Three development scenarios have been developed: baseline, optimistic, and stress scenario. The baseline scenario, which assumes moderate debt growth and a gradual decline in the yield of government bonds, demonstrates slow stabilization of the integral indicator. The optimistic scenario, based on the assumption of improving the borrowing structure and increasing reserves, forecasts strengthening of debt security. In contrast, the implementation of the stress scenario may lead to a critical decline in the level of security, threatening the State’s solvency. Based on the results of the study, it was concluded that strengthening Ukraine’s State debt security requires a targeted impact on the key parameters of debt, in particular: restraining the debt burden, optimizing the structure of State obligations, reducing borrowing costs, and increasing official international reserves. It is substantiated that under conditions of armed aggression and future economic reconstruction, debt security consolidates as one of the fundamental factors ensuring financial security and the resilience of the national economy.

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