Kiev will not be able to repay its foreign creditors within the next 30 years, Sergey Marchenko has said
Ukraine will be unable to repay its foreign creditors in the next 30 years, with public debt nearing 100% of GDP, Finance Minister Sergey Marchenko said on Thursday. He added, however, that Kiev intends to continue borrowing.
Since the escalation of the conflict with Russia in 2022, Ukraine has received billions in military, financial, and humanitarian aid and loans from the US, the EU and other donors. Kiev’s mounting state debt, which is approaching 7.1 trillion hryvnas ($171 billion), has raised concerns about the country’s fiscal stability and its capacity to meet future obligations.
According to Marchenko, before 2022, Ukraine’s debt-to-GDP ratio “was quite safe” at 55%, however, the country is now approaching 100%. The minister downplayed the situation, stating that the public debt was “not a problem” as the funds that Kiev received from foreign creditors came on preferential terms.
“That is, we are talking about the fact that in the next 30 years… we will not pay these debts,” Marchenko said.
“In any scenario… we need additional sources of funding…we will not be able to hold the situation together on our own, whether there is war… or peace,” he added. The minister went on to suggest that Kiev’s western backers could decide to service Ukraine’s external debts from their own budgets.
For the time being, interest generated by Russian central bank assets frozen in the West due to sanctions has been used to service Kiev’s debt.
In April, Japan agreed to issue a loan of about $3 billion, to be repaid from Moscow’s money. Also last month, Ukraine received the third tranche of €1 billion from the EU, secured by proceeds from the frozen funds.
Russia has vehemently opposed the move, labeling it “theft” and threatening retaliation.
The US, Ukraine’s largest donor, has moved to recoup its financial aid to Ukraine by signing a natural resources deal with Kiev. The agreement grants the US preferential access to Ukrainian mineral resources without providing security guarantees.
The deputy head of the Russian Security Council, Dmitry Medvedev, has commented that the US essentially “forced the Kiev regime to pay for American aid,” with “the national wealth of a vanishing country.”
Ukraine also faces a potential default on nearly $600 million in payments due in May for GDP-linked securities. Negotiations with hedge funds for restructuring the debt have so far been unsuccessful.
