$90 Billion in Debt: Ukraine’s Ticking Time Bomb

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The European Union has pledged €90 billion to Ukraine for 2026-2027. At first glance, it appears to be a lifesaving financial lifeline to cover the country’s wartime budget shortfalls. Yet beneath this generous gesture lie hidden debt traps and long‑term obligations that could shape Ukraine’s future. 

Let us have a closer look at the hidden risks, pitfalls, and long-term consequences of such a loan — ranging from macroeconomic indicators and political conditions to potential social tensions and historical parallels.

Ukraine’s public debt has grown rapidly during the full-scale war and is expected to remain at a dangerously high level in the coming years. According to the International Monetary Fund, Ukraine’s public debt will reach approximately 108.6% of GDP in 2025 — almost double its pre-war level and well beyond commonly accepted safety thresholds.

Estimates by the Ministry of Finance and independent experts suggest that in 2026–2027 the debt-to-GDP ratio will remain above 100%, meaning that for every hryvnia generated by the economy, there is already roughly one hryvnia of public debt.

To put this into perspective: even by 2027, if the war continues, Ukraine will effectively remain in a debt-dependent state, with the pace of debt accumulation determined by the duration of hostilities and the scale of external financial assistance.

As a result, Ukraine has entered the cohort of the world’s most indebted countries. With public debt approaching 109% of GDP, the country already ranks among the top 20 sovereign debtors globally, placing it around 16th worldwide. For comparison, this level is comparable to Canada (approximately 114%) and Belgium (around 108%), and in some cases exceeds that of several advanced economies.

Within Europe, Ukraine is surpassed only by chronic high-debt countries such as Greece (≈147%) and Italy (≈137%) in terms of the debt-to-GDP ratio.

The accompanying chart compares Ukraine’s public debt with that of other highly indebted countries. Highlighted in colour, Ukraine stands out as one of the states with the highest debt burden in the world in 2025, exceeded by only a limited number of countries.

The €90 billion allocated by the EU is expected to cover most of Ukraine’s needs for 2026–2027, but the fiscal reality is far more complex. According to estimates by the European Commission and the IMF, Ukraine’s total financing gap over these two years amounts to €130–135 billion.

In other words, even the €90 billion provided by Europe will not be sufficient to cover all expenditures. Kyiv expects to secure the remaining €40–45 billion from other partners—the United States, international financial institutions, and other allies. Without this additional support, Ukraine could face a budgetary default as early as the spring of 2026. In this sense, the EU loan functions as an oxygen mask—essential to prevent the country from financial “asphyxiation” in the midst of war.

At the same time, a logical question arises: what exactly will this enormous sum be used for? Will the €90 billion actually finance the army, social payments, and reconstruction—or will a substantial share simply be absorbed by debt servicing and reserves?

An analysis of the draft 2026 budget shows that Ukraine plans to allocate ₴513 billion (approximately $12.2 billion) solely to interest and debt repayments. This amounts to nearly a quarter of all the foreign assistance the country hopes to receive that year.

As a result, a significant portion of EU funds would not address new needs but instead be used to service existing obligations—effectively feeding a continuing “debt spiral.” Moreover, a sizeable share may end up parked in financial reserves. The experience of other countries—such as Argentina’s most recent IMF mega-loan—demonstrates that large tranches often go toward debt servicing and replenishing foreign exchange reserves rather than directly stimulating the real economy.

There is therefore a real risk that part of Ukraine’s €90 billion will remain as “dead capital” on accounts—used to stabilize the hryvnia or await creditor payments—while urgent priorities such as the military, reconstruction, and social protection fail to receive adequate funding.

The biggest intrigue concerns the terms of repayment of this debt. Brussels initially stated that Ukraine would begin repaying the €90 billion only after Russia pays reparations. In effect, this makes the loan “non-repayable” for the duration of the war.

Moreover, the EU has formally linked repayment to the confiscation of Russian assets. The €210 billion in frozen Russian central bank reserves held in Europe remain untouched, but in theory could be used to cover Ukraine’s debt if Moscow agrees to compensate for the damage caused.

German Chancellor Friedrich Merz has even stated: “If Russia does not pay reparations, we will, in full accordance with international law, use frozen Russian assets to repay the loan.” In other words, the entire model rests on Russian money. It sounds optimistic—but what happens if reparations never materialise?

The Kremlin has already declared that it will not pay anything. Meanwhile, Belgium—where around 88% of Russia’s frozen EU reserves are held—has blocked a legal mechanism for confiscation, citing the risk of lawsuits. As a result, the EU has shifted to a Plan B: borrowing on Ukraine’s behalf using its own resources through the issuance of joint Eurobonds, while postponing the question of Russian assets indefinitely.

In practice, Brussels has “frozen” the problem. Ukraine receives the funds now, but if Russia continues to refuse reparations, the debt does not disappear. It will either be continuously refinanced—rolled over from year to year—or eventually covered by EU taxpayers. Yet no one can guarantee that, in 10–15 years, European governments will still have the political will to convert this debt into unconditional aid.

The answer is fairly clear. In a pessimistic scenario, Ukraine will still owe €90 billion—and will have to repay it from post-war budgets, through spending cuts and higher taxes. This is, in effect, a deferred “debt for growth” imposed on the country’s future.

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