Reclassifying international loans as grants will allow Ukraine to significantly improve its public debt-to-GDP ratio
The National Bank has revised its macroeconomic forecast and now expects public and government-guaranteed debt to decline to about 90% of GDP over the forecast horizon, compared with its previous forecast that the figure would significantly exceed 100%. The NBU said this in its new inflation report.
“Despite significant budget deficits amid moderate economic growth, public and government-guaranteed debt will decline to about 90% of GDP over the forecast horizon. This is primarily due to the reclassification of a portion of international aid (the USL program) from loans to grants,” the document states.
The NBU’s forecast differs from the Cabinet of Ministers’ assessment. In its Budget Statement for 2027–2029, the government projects that the ratio of public and government-guaranteed debt to GDP will exceed 100% throughout the forecast horizon, reaching 108.7% of GDP in 2029.
According to the NBU’s updated forecast, the state budget deficit will increase significantly in 2026, reaching 35% of GDP excluding grants from revenue, and will be financed primarily through long-term support programs.
Gradual fiscal consolidation is projected for 2027–2028. However, the pace of deficit reduction is likely to be more moderate than previously expected due to high security and defense spending and growing infrastructure rehabilitation needs, against the backdrop of higher confirmed official financing.
This is a machine translation of the original article in Ukrainian. It may contain errors.