Debt Instruments to Ensure the Stability of Ukraine’s Financial System During Martial Law

The article is dedicated to the study of the issues related to the management of Ukraine’s State debt in the context of martial law. Scientific methods such as abstraction, systemic analysis, historical-logical reasoning, as well as methods of analysis and synthesis, and systemic-structural analysis were employed. The dialectical method allowed for the determination of the dual nature of State debt, which, on one hand, serves as an instrument for maintaining financial stability and stimulating economic growth, and on the other hand, represents a source of potential crises due to the necessity of high debt repayments and the risks of a debt spiral. An analysis of the dynamics of Ukraine’s State debt, particularly its external component, was carried out for the period from 2015 to 2024. It is found that with the onset of the full-scale war, there was a significant increase in the debt burden, caused by rising defense expenditures and a decline in GDP. The positive impact of preferential borrowing conditions from international partners on the structure and cost of debt, as well as on the growth of international reserves, has been underlined. At the same time, attention has been drawn to the increase in currency and inflation risks associated with a significant volume of external borrowings and the high NBU discount rate. The influence of State debt on the monetary sphere, in particular on the dynamics of international reserves and the yield of government bonds, has been analyzed. Indicators of Ukraine’s debt burden and their compliance with critical values have been assessed. Conclusions have been drawn regarding the improvement of public debt management, and recommendations have been provided aimed at ensuring macroeconomic stability and the long-term sustainability of the financial system, including: active engagement of preferential and grant financing, strengthening control over credit conditions, enhancing risk management in the debt sphere, and developing the domestic capital market. Emphasis has been placed on the necessity of balancing the current financial policy with a strategic focus on the security of debt financing and the gradual replacement of external debt inflows with internal sources.