During two and a half years of full-scale war, Ukraine’s public debt in hryvnia equivalent increased by 2.3 times (+3,644 billion UAH), and in foreign currency equivalent - by 66% (+$62 billion). However, Ukraine has experience in stabilizing and reducing public debt, which it acquired after the active 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 Hetmantsev.
According to Hetmantsev, the structure of the state 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 public debt will continue to deteriorate due to a significant budget deficit associated with huge defense spending.
“Nevertheless, given the three years of war, which also occurred during a period of high interest rates in the world, the debt burden remains moderate and controllable,” Hetmantsev 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 essence, the entire external government 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 the world’s central banks, but this rate under the EFF program is now less than the cost of potential external market borrowings," Hetmantsev explained.
According to the Finance Ministry, the average weighted cost of Ukraine’s public debt decreased by 10.3% in the first half of 2024, 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, there is 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’s financial committee.
He recalled that Ukraine has experience in stabilizing and reducing the level of public debt after the active phase of the war in Donbas in 2014-2015.
"Over the past 5 years, compared to 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 budgetary needs that determine the growth of the public debt is much greater. But the support of partners is an order of magnitude greater. As well as the understanding that Russia, as an aggressor, must suffer symmetrical financial punishment for its aggression, including at the expense of sovereign assets blocked in the G7 countries," emphasized Danylo Hetmantsev.
01 September 2024 г., 21:48
