Ukraine will remain heavily dependent on external financial support and face rising debt sustainability risks unless a durable peace settlement enables a substantial reduction in defense spending. Prolonged conflict would likely necessitate further debt restructuring despite continued Western and International Monetary Fund (IMF) support. Due to the full-scale war with Russia, Ukraine has been forced to pursue a "defense-first" strategy, with over 50% of total government expenditures allocated to military and security objectives. Expenditure for Ukrainian defense and security -- encompassing the National Guard, Border Guard and police forces -- remains exceptionally high, with defense outlays currently equivalent to total government revenue. Consequently, the administration maintains a significant reliance on international loans and grants to finance substantial current account (external) and budget (government) deficits. As a result of these persistent fiscal imbalances, government debt has increased from approximately 50% of GDP in 2021 to more than 100% of GDP in...
