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When the guns roar: how the war, reserves and exports shape Ukraine’s cost of external borrowing

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  • Sergii Sheludko

    (State Tax University, Kyiv region, Ukraine)

Abstract

This study examines factors shaping Ukraine’s cost of external borrowing amid the 2022 Russian invasion. It focuses on the impact of the intensity of military activities, the size of central bank reserve assets, and the volume of grain and oilseed exports on sovereign bond spreads. Estimates from an ARDL model with data from September 2021 to July 2024 suggest a stable long-term relationship between the spreads, military activities and reserve assets, with escalating military actions widening the spreads and larger reserves narrowing them. The effects of exports on the spreads are not statistically significant, probably reflecting the difficulty to transport large quantities of grain and oilseeds in wartime conditions. The findings underscore the role of monetary policy in managing the cost of external borrowing, and the importance of foreign exchange reserves in mitigating sovereign debt and foreign exchange market risks in wartime conditions.

Suggested Citation

  • Sergii Sheludko, 2026. "When the guns roar: how the war, reserves and exports shape Ukraine’s cost of external borrowing," Public Sector Economics, Institute of Public Finance, vol. 50(1), pages 95-115.
    • Handle: RePEc:ipf:psejou:v:50:y:2026:i:1:p:95-115
    DOI: 10.3326/pse.50.1.5
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    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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