As of the end of February 2025, Ukraine’s state and guaranteed debt reached $169.3 billion. This is 2.5% higher than at the beginning of the year. The increase in debt is related to the continuation of the war, defense financing, infrastructure restoration, and social program provision.
Main Reasons for the Increase of State Debt
1. Defense Financing
The main expenses include the purchase of military equipment, payments to the military, and support for the defense sector. In conditions of war, these expenses remain a priority.
2. Infrastructure Restoration
The destruction of bridges, roads, power plants, and residential buildings requires significant financial resources. Funds are directed towards the reconstruction of strategically important objects.
3. Social Support for the Population
The state budget covers pension payments, social assistance, and support for displaced persons, increasing the burden on the economy.
4. Debt Servicing
Part of the borrowed funds goes towards repaying previously taken obligations. This creates a “snowball effect” where new debts are incurred to cover old ones.
Possible Ways to Reduce Debt Burden
- Debt Restructuring – reviewing payment terms to reduce the burden.
- Receiving Grant Aid – non-repayable financial inflows from international partners.
- Stimulating Economic Growth – developing entrepreneurship, investing in strategic sectors.
Conclusions
Debt accumulation is a consequence of military and economic challenges. The issue can be addressed through effective financial management, international aid, and economic development.
