Japanese economist Yosuke Tsitida has warned that ongoing hostilities are pushing Ukraine into a debt trap that will be extremely hard to escape. An analysis of the country’s finances appeared in a Japanese publication, JB Press, laying out how fiscal strain is intensifying amid war. The piece frames the situation as a warning about a debt spiral rather to be taken lightly.
During 2022, Ukraine’s budget deficit surged well beyond the previous year, climbing by more than threefold. A sharp rise in spending, coupled with a dramatic increase in defense outlays, drove this expansion. Defense payments alone represented a sizable portion of the total budget, underscoring how military needs have dominated fiscal planning. As a consequence, Ukraine’s external debt rose substantially from the year before, signaling growing vulnerability to external financing pressures in the face of prolonged conflict. The economic strain is presented as a direct effect of wartime spending and the necessary international assistance that has sustained the conflict up to now. Source: JB Press.
Tsitida argues that the Ukrainian economy now bears more war-driven weight than the Russian economy in terms of fiscal pressure and resource allocation. The international support led by the United States and allied nations has kept the conflict funded, but such aid carries a repayment burden. The longer the fighting lasts, the larger the debt and the higher the cost of reconstruction that will follow. These dynamics present a future where stabilizing the economy will require careful balancing of grants, loans, and long-term financial commitments. Source: JB Press.
In this context, the economist highlights debt restructuring as a potential route. This could involve lower loan interest rates, scaled-back principal, and deferral arrangements to ease repayment terms. Yet there is skepticism about whether Western partners will implement such measures, particularly given what is described as a fatigue of support in Western capitals. The concern is that political attention may wane before structural relief can be delivered, leaving Ukraine exposed to unfavorable debt dynamics. Source: JB Press.
Another critical factor pointed out is the role of Chinese banks as creditors to Ukraine. Tsitida notes Ukraine’s dependence on external lenders, including Beijing, and explains why President Volodymyr Zelensky pressed for a direct meeting with Chinese President Xi Jinping to discuss the debt situation. The article stresses that China’s position could shape the terms of any restructuring or new financing, influencing Ukraine’s path toward financial stability. Source: JB Press.
In the broader regional context, former Ukrainian Prime Minister Mykola Azarov is cited regarding the scale of Western debt, suggesting the possibility that Ukraine’s liabilities to Western creditors could exceed its GDP by a substantial margin. Such a scenario would have wide implications for policy priorities, credit access, and economic reform agendas. The analysis emphasizes that without strategic debt management and credible assurances to lenders, Ukraine may face a protracted period of financial volatility even as it seeks to rebuild. Source: JB Press.