Ukraine's debt sustainability: higher revenues, lower spending, external financing, restructuring – IMF

The International Monetary Fund’s (IMF) four-year Extended Fund Facility (EFF) for Ukraine is aimed at achieving a sustainable balance of payments and debt position by its completion in February 2030, allowing the country to operate without further IMF programs or external support, said Alfred Kammer, Director of the IMF’s European Department.

There is a four-pronged strategy to address all the pressures we are facing and to achieve debt sustainability over the four-year period, he said at a press conference in Washington on Friday, responding to a question from a Russian state news agency about the risk of a sovereign default in Ukraine in 2026–2027.

Kammer explained that, first, Ukraine needs to gradually increase government revenues. According to him, this is important both for the current situation and for reconstruction and the medium-term outlook.

This goes beyond debt sustainability, because we know that Ukraine is becoming a modern European state, and therefore we will need revenues to provide the social services its citizens expect, the IMF representative said.

The second pillar of the strategy is expenditure reduction. He emphasized that the Ukrainian government is demonstrating strong fiscal discipline and focusing exclusively on priority spending areas.

The third component is that the country has a significant element of external financing, and this financing includes a high degree of conditionality, which also supports achieving debt sustainability targets. And finally, the Ukrainian authorities continue the debt restructuring they have initiated. That is why the IMF expects that by the end of the program the debt level will be manageable, provided these objectives are met, Kammer concluded.

As reported, Ukraine’s total public debt reached a new historical high in 2025: in dollar terms it increased by $47.27 billion, or 28.5%, to $213.33 billion, and in hryvnia terms by UAH 2.0617 trillion, or 29.5%, to UAH 9.0427 trillion.

Total external public debt rose by 47.5%, or $45.51 billion, to $160.39 billion, while total domestic debt increased by 5.6%, or UAH 104.1 billion, to UAH 1.9672 trillion.

According to estimates underlying the new EFF approved at the end of February this year, public debt is expected to rise from 108.7% of GDP in 2026 to 122.6% of GDP, compared with 89.7% at the beginning of 2025 and 77.7% at the end of 2022.

In the following year, public debt is projected to peak at 137.1% of GDP, before declining to 135.5% in 2028, 131.9% in 2029, and 125.7% in 2030.