Core Insights - The Ukrainian government's debt is on the rise, with the IMF increasing its debt projections despite a successful restructuring of USD 20.5 billion in Eurobond securities in 2024 [1][2] - The IMF's goal for public debt to fall to 82% of GDP by 2028 and 65% by 2033 is at risk due to the ongoing conflict, which is expected to last beyond mid-2026 [2][3] - Ukraine's military spending constitutes 60% of its total budget, necessitating significant foreign assistance to cover essential costs [4] Debt Sustainability and IMF Programs - The IMF's Extended Fund Facility for Ukraine, the first of its kind for a country at war, raises uncertainties regarding debt sustainability and repayment prospects [3] - Ukraine has requested a new four-year program from the IMF as the current one is set to conclude in March 2027 [4] - The IMF estimates Ukraine's additional foreign financing requirement at around USD 65 billion through the end of 2027, significantly higher than Ukraine's initial estimate of USD 38 billion [8] Economic Projections and Fiscal Deficits - Scope Ratings has revised its growth estimates for Ukraine to 2.0% for 2025 and 2.25% for 2026, with fiscal deficits projected to remain high at approximately 18.3% of GDP this year and 15.3% next year [5] - Public debt is expected to exceed 95% of GDP by the end of this year, up from 91.2% at the end of 2024 and 49% at the end of 2021 [5] Funding Challenges and Proposals - Ukraine requires around USD 50 billion annually from allies, with the EU likely needing to cover a significant portion of this due to potential hesitance from the US [9] - An innovative proposal from the European Commission involves using frozen Russian assets, estimated at EUR 140 billion, to provide zero-interest loans to Ukraine, effectively functioning as grants [11] - The German Chancellor supports the EC's proposal, emphasizing the need for funds to procure military equipment [12] Debt Restructuring Considerations - There is ongoing discussion about whether further external debt restructuring is necessary to ensure Ukraine's debt sustainability and maintain IMF support [13] - The recent restructuring of Eurobonds involved a 35.75% haircut, with future coupon payments expected to increase by 2026-27 [15] - The Eurobonds represent less than 10% of Ukraine's outstanding public debt, but they are crucial for achieving savings from debt restructuring [17]