State debt of Ukraine crossed an important mark

In September, Ukraine's state and state-guaranteed debt increased by 32.31 billion hryvnias and exceeded 6.4 trillion hryvnias for the first time. The main part of this debt is accounted for obligations to foreign countries and international financial institutions.

This was reported by the press service of the Ministry of Finance of Ukraine.

How the volume of state debt increased

As of September 30, 2024, Ukraine's state and state-guaranteed debt amounted to 6.4 trillion hryvnias, which is equivalent to 155.56 billion dollars. 6.1 trillion hryvnias (95.52% of the total debt) of this amount accounted for Ukraine's state debt, which consists of:

•    External debt: UAH 4.39 trillion (68.60% of the total debt), which is equal to $106.72 billion dollars.
•    Domestic debt: UAH 1.72 trillion (26.92% of total debt), which is $41.87 billion.

The remaining debt, which is UAH 286.98 billion (4.48%), or $6.97 billion, is Ukraine’s state-guaranteed debt. This amount consists of:

•    State-guaranteed external debt: UAH 219.78 billion (3.43% of total debt).
•    State-guaranteed domestic debt: UAH 67.20 billion (1.05% of total debt).

Reason for the state debt increase

In September, Ukraine’s state and state-guaranteed debt increased by UAH 32.31 billion, which is equivalent to $0.87 billion. As explained by Danylo Hetmantsev, Head of the Ukrainian Parliament Committee on Finance, Tax and Customs Policy, the main reason for the increase in public debt is borrowing on the domestic market.

"September was one of the few months when the growth of the state debt was due to borrowing on the domestic market (+40.5 billion UAH), while the external debt, although minimally, decreased (-8.9 billion UAH). Such dynamics are due to the Ministry of Finance's increased attraction of state government bonds at auctions in order to finance the increased budget deficit due to the growing needs of the security and defense sector," the MP noted.

He emphasized that in September, the volume of issuance of state government bonds was the highest since the beginning of the year. This allowed the Ministry of Finance to attract 72.4 billion UAH (in all currencies), which is 2.5 times more than in August. In September, payments on the repayment of state government bonds amounted to 26.5 billion UAH.

Hetmantsev predicts that in October the trend towards a significant increase in domestic state debt may continue, since October 11 the National Bank has introduced a number of decisions aimed at stimulating the participation of banks in auctions for the placement of government bonds, which, in turn, will increase their role in financing the budget deficit.

In particular, banks were obliged to increase the reserve requirement ratio by 5 percentage points, as well as increase the proportion of these reserves invested in the government bond benchmark from 50% to 60%. In addition, the rate on three-month certificates of deposit was reduced.

Ukraine's state debt will also increase in October due to the provision of the 6th tranche under the EFF macrofinancial support program in the amount of $1.1 billion.

What else you need to know

The International Monetary Fund (IMF) revised its forecasts for the Ukrainian economy for 2024-2025, lowering them due to the ongoing war. The fund's experts noted that previously there were hopes for a quick end of the conflict, but its protracted nature leads to new economic losses for the country.

At the beginning of September, Ukraine announced the successful completion of debt restructuring, which included thirteen series of government Eurobonds and state-guaranteed bonds. Thanks to this operation, the state debt was reduced by about $9 billion.