Ukraine's External Debt Surpasses GDP, Raising Hryvnia Risks as Currency Controls May End

Analyzing Ukraine's Gross External Debt

According to ХВИЛЯ: An examination of Ukraine's gross external debt and current account deficit reveals mounting risks for the hryvnia's exchange rate, particularly if currency restrictions are lifted. Ukraine's gross external debt stands at approximately $220 billion, exceeding 100% of its Gross Domestic Product (GDP). This is a serious economic imbalance, as the generally accepted sustainable debt threshold for a country is 60% of GDP. For context, this level of indebtedness is exceptionally high, even for a nation in conflict.

Specifically, the accumulated external liabilities of residents are 3.5 times larger than the foreign exchange reserves held by the National Bank of Ukraine (NBU), a disparity that concerns financial experts. As Oleksiy Kozirev points out:

'The key threat is that the accumulated external liabilities of residents exceed the volume of the NBU's foreign exchange reserves by 3.5 times.' - Oleksiy Kozirev

The Current Account Deficit

In 2025, the current account deficit reached $31.9 billion, which is 14.9% of GDP. Excluding reinvested earnings and grants, this deficit was $43.5 billion, or 20.3% of GDP. The trade deficit for the year grew by 32%, an increase of $18 billion, reaching a total of $56.8 billion. It is worth noting that these metrics have been in the danger zone since 2013, with the only positive current account balance occurring in 2020.

Experts warn that 'if currency restrictions are lifted, this will lead to a significant increase in demand for foreign currency,' potentially exacerbating existing problems. Kozirev notes the broader context:

'For a country at war, this picture is an objective reality, not solely a structural problem of the economy.' - Oleksiy Kozirev

These factors underscore the need for careful monitoring of Ukraine's economic situation. The growing gross external debt and current account deficit highlight the vulnerability of the Ukrainian economy, which could intensify if currency controls are removed. A further deterioration could lead to a devaluation of the hryvnia and heightened inflationary risks.

It is crucial for the government and the National Bank of Ukraine to implement measures to stabilize the economy and ensure economic growth, which is critically important for post-war recovery.