War-Driven Factors of Public Debt Growth and Their Impact on Ukraine’s Macroeconomic and Financial Stability

The article examines the war-driven factors behind the growth of Ukraine’s public debt and their impact on macroeconomic and financial stability under conditions of prolonged full-scale military aggression. It analyzes structural transformations of the state debt policy, identifies the role of defense expenditures and the reduction of the fiscal base in forming budget deficits, and outlines the specifics of financial support during wartime. The findings demonstrate that the increase in public debt does not represent a crisis phenomenon but serves as a vital instrument for sustaining economic viability and ensuring the functioning of the security and defense sector. It is proven that the key determinant of debt sustainability is the quality of financing rather than its volume. A high share of grants and concessional loans provided by international partners contributes to lowering servicing costs and postponing peak debt risks. The restructuring of commercial external obligations, which includes a reduction in the nominal value of debt and deferral of repayments, temporarily alleviates pressure on the state budget and allows resources to be redirected toward defense and social expenditures. Special attention is given to the currency structure of public debt. The study shows that external debt denominated in foreign currencies-typically associated with exchange rate vulnerability-acquires a stabilizing function in wartime due to the systemic inflow of donor financing, which supports international reserves and ensures exchange rate stability. At the same time, the research identifies medium-term risks related to financing post-war reconstruction, which may lead to a “second wave” of debt dependence unless compensated through war reparations and expanded grant support. The article substantiates the need to transition toward a model of post-war reconstruction financing without generating a new debt peak. Recommended strategic priorities include maximizing grant-based financing, employing frozen assets of the aggressor state, developing the domestic capital market, and stimulating economic growth. The results have practical implications for shaping debt policy, designing post-war recovery strategies, and ensuring long-term financial security for Ukraine.