This chapter provides recommendations to strengthen public debt management in Ukraine. It contains four sections. The first focuses on the set up of the debt management function, with a particular focus on developing the middle office function. The second section looks at Ukraine’s debt portfolio strategy and instrument choice. The third section focuses on new tools that could be utilised to enhance cash and liquidity management. The fourth section looks at measures to strengthen the management of contingent liabilities and credit guarantees. The recommendations in this chapter draw on the experiences and inputs of OECD debt managers and the work of the OECD Working Party on Debt Management.
Stronger Financial Markets and Institutions for Ukraine’s Recovery
Abstract
A well‑functioning public debt management framework is essential for Ukraine to maintain market access under prolonged wartime pressures, as well as to secure the financing needed for recovery and long‑term growth. The Ukrainian Ministry of Finance (MoF) has demonstrated strong performance in recent years, conducting sound debt management practices while facing exceptionally high financing needs and the severe constraints imposed by Russia’s war of aggression.
This chapter aims at providing recommendations to further improve debt management practices and policies in Ukraine. Priority recommendations include focusing on building and extending a liquid and smooth local currency yield curve, pursuing continued renegotiation of outstanding external public and publicly guaranteed debts, and enhancing transparency by maintaining public registers of all state guarantees while moving toward regular consolidated reporting of all measurable contingent liabilities.
Furthermore, the MoF should consider the case for setting up a designated debt management office (DMO), consolidating all relevant functions within a single and lean institution. A dedicated and strengthened middle office function would allow for enhanced risk management. The MoF should also assess the case for the introduction of additional financing instruments, explore measures to improve cash‑flow forecasting, and closely monitor innovations in digital finance. In addition, the DMO could play a larger role in the management and monitoring of the contingent liabilities of the Ukrainian state.
The context for public debt management in Ukraine remains challenging, with Russia’s full-scale invasion continuing into its fifth year. While the economy has shown remarkable resilience, soaring defence expenditures of over 30% of GDP annually and weaker revenues have put the fiscal position under significant strain (SIPRI, 2026[1]). Ukraine’s public debt is rising sharply, surging from less than 50% as a share of GDP in 2021 to greater than 100% in 2025, and it is set to remain above 100% in the coming years (OECD, 2025[2]). Concessional financing still constitutes approximately 60% of outstanding public debt, with borrowing via bond markets constituting less than 25% of financing in 2025 (Ministry of Finance of Ukraine, 2025[3])
As identified in Chapter 4 of the report “Mapping Ukraine Financial Markets and Corporate Framework for a Sustainable Recovery”, the key challenges to public debt management in Ukraine include a high and growing share of external and foreign currency debt leading to increased currency risk; a front-loaded redemption profile, with the average maturity of domestic issuance remaining relatively short; a viable but limited institutional set up for public debt management in the context of needing to access more market based financing in the future; limited liquidity in the domestic bond market, with ownership and risk concentrated in the banking sector; and rapidly growing explicit and implicit contingent liabilities which could have a substantial impact on debt sustainability (OECD, 2025[4]).
All of this limits the Ukrainian government’s fiscal space to invest in long-term growth and support its citizens. All else being equal, government debt might also crowd out financing to the private sector, which can limit the development of Ukraine’s capital markets and negatively affect economic growth. Furthermore, concerns about Ukraine’s longer-term debt sustainability will act as a potential barrier to the much-needed investment to support reconstruction and redevelopment efforts once the war has ended.
Although many of the potential solutions to the identified issues fall outside the direct scope of the debt management function, some steps can be taken in the medium and long term to help strengthen public debt management in Ukraine. Over the last decade, strong progress has been made on the framework, decision-making processes, and operational capacity of public debt management in Ukraine. It is now operating to a standard comparable with OECD countries.
Working with the relevant authorities in Ukraine, the OECD has now identified four broad themes where policy recommendations can support further improvements. This chapter includes four sections covering each theme:
the institutional setup of the debt management function
portfolio strategy and the potential issuance of new debt instruments
accessing new tools for cash and liquidity management
strengthening the management of contingent liabilities and credit guarantees
The Ministry of Finance of Ukraine is fully responsible for public and state-guaranteed debt management, acting under the current legislation and approved by the government’s current Debt Management Strategy (Ministry of Finance of Ukraine, 2019[5]). The model for public debt management in Ukraine is viable and has enabled continued access to capital markets under martial law, with bond issuance making an increasing contribution to net financing since the middle of 2023. However, in the longer term, where the intention is for bond issuance to form a much larger proportion of financing, the efficiency of this model may be limited.
This section provides recommendations to enhance the institutional arrangements for public debt management, focusing on the following measures:
strengthening the organisational arrangements to better integrate all public debt activities into a single structure, and assess the case for setting up a dedicated DMO.
further developing the middle office function, to assess and monitor medium- to long-term costs and risks associated with different issuance strategies, and the debt and credit guarantee portfolio (as also discussed in Chapter 2)
improving recruitment and retention measures, to ensure that the debt management function is well resourced, and to attract and retain highly skilled staff
4.2.1. Integration of the debt management functions
The longer-term transition to a new format for public debt management in Ukraine could see the establishment of a separate DMO. This office would be at arm’s length from the wider Ministry of Finance, with delegated authority for operational decisions on debt and cash management. This would help to support five main objectives:
Increased focus and independence: As a separate government institution, the DMO will be less dependent on and will be at a distance from political factors. This is important for enhancing investor confidence and the predictability of public debt management processes in the long term.
Diversification of debt instruments: The focused and lean setup of a separate DMO will increase the institutional capacity, enabling the more effective and comprehensive use of debt management instruments. This will better serve the objective of meeting the government's financing needs at the lowest possible cost, taking account of medium to long-term risk.
Enhanced liquidity management: The increased capacity will also enable the DMO to make use of advanced liquidity management tools and potentially utilise more market instruments. This, in turn, will help avoid liquidity and solvency stress episodes at the beginning of budget periods, ensuring the efficient use of any surplus funds.
Use of technology: Building an independent DMO function will allow it to run its own IT infrastructure targeted at the specific needs of a financial market institution. This will provide the opportunity to use modern technologies to make sure that all critical delivery chains (e.g., payments and settlements) are resilient (according to new standards) and business continuity can be better secured at all times in all conditions.
Enhanced investor relations: Such a setup would also better serve the objective of strengthening investor relations, as a separate DMO can serve as a hub for investor feedback and consultation, allowing for more regular dialogue with market participants, particularly as that institution would house the dealing desks.1
However, this setup requires additional financial and political support, and can take a long time to achieve. Equally, from a practical point of view, such a setup may be more easily achieved once Russia’s war of aggression ends. Many but not all OECD members operate with such a setup. Within the EU, for example, several countries, including Germany, Greece, Hungary, Ireland, Slovakia, and Sweden conduct public debt management through a separate or ‘arms length’ institution.
In the near term, concentrating all the debt management functions (front, middle, and back office) in one place (a single team or directorate) could also help to support the aforementioned objectives. Figure 4.1 provides an indicative example of a centralised framework that Ukraine could pursue, which can be adapted to the institutional and organisation structure and preferences.
4.2.2. Enhancing risk management through the development of the middle office function
The development of the middle office function is crucial to support risk management. Ideally, the middle office will be staffed with individuals with multidisciplinary skillsets, including quantitative analysis, financial economics, and public policy. The middle office would assume full responsibility for identifying the different types of risk that can affect the debt portfolio and credit guarantees (Table 4.2).
In addition, the middle office would be a leading contributor to debt sustainability analyses and would also advise senior management and ministers on the use of strategic benchmarks (to anchor the portfolio), derivatives, or other instruments to hedge risks, and conditions or limits for issuing credit guarantees to ensure fiscal risks are manageable.
The middle office would also be responsible for the creation of risk management or guarantee frameworks, as well as reporting systems for transparency and accountability purposes, for example, risk dashboards or reports to the wider Ministry of Finance, Ukrainian Parliament, or Cabinet of Minister of Ukraine.
Finally, the middle office could play a leading role in the implementation and development of any AI tools, including chatbots, closed-loop large language models (LLMs), or new AI generations to support any of the debt management functions.
4.2.3. Recruitment and retention of key skillsets
Another key consideration will be the remuneration of key personnel, as well as how Ukraine can recruit and retain the skills necessary to establish a robust public debt management function that can meet the bulk of its financing needs through bond issuance. Sovereign debt management encompasses highly technical tasks such as funding, liquidity management, risk management, and settlement and payments that require a high degree of financial expertise and experience, business development skills, legal resources, as well as public policy skills (OECD, 2020[6]). The ability to attract and retain skilled staff is also crucial for mitigating operational risk. In addition, building staff capacity through technical assistance and peer learning would help support the development, communication, and implementation of the debt management strategy.
Any debt management function requires staff with backgrounds and experience in financial markets, risk management, macroeconomics, IT systems, software development, law, and accounting. This list is by no means exhaustive, and further skillsets may be required based on the specific circumstances in which a debt management function operates. For Ukraine, there is also a particular need for individuals with skills in cybersecurity, given the threats it faces in this field from nefarious actors, and also investor relations, given the need to attract new investors into its markets and the wider economy. The problem all debt management functions face is that such skills are in high demand by other parts of the official sector (such as the central bank, the financial services regulator, etc.) and in the private sector, where pay is often higher. However, there are several steps that can be considered to increase the attractiveness of working in the debt management function, as well as helping to retain skilled staff:
Adjusting pay and reward frameworks
Pay could be benchmarked against the National Bank of Ukraine, rather than the wider civil service/public sector.
Specialist pay allowances could be permitted (for example, for certified legal, IT, accounting, or software skills).
There could be a link made between pay, performance, and skills development.
Enhancing career development within public debt management
Establishing clear career paths for officials working in the debt management function (for example, from analyst to senior analyst, to manager or team leader) could encourage retention.
The debt management function could fund the undertaking of relevant professional qualifications or training for staff members (for example, the CFA (Chartered Financial Analyst) or relevant IMF training programme courses).
Secondments could be offered to the NBU, other teams within the Ministry of Finance, or international financial institutions that work on public debt management.
The provision of two-way mentoring opportunities, as well as leadership development opportunities and programmes, could also encourage long-term career growth within debt management.
Building a longer-term recruitment pipeline
Building direct links with schools, universities, and research institutions could help access future talent, collaborate on relevant innovation and research opportunities, and enhance the reputation and visibility of the work.
Running regular internship, apprenticeship, and graduate trainee programmes could help to attract junior staff while giving them space to develop their skills.
Recommendation 1: Consider the case for setting up a designated debt management office with all functions (front, middle, and back office) in one place.
Recommendation 2: Enhance risk management through the development and integration of the middle office function.
Portfolio strategy is at the heart of public debt management. Central to the portfolio strategy is the choice of debt instrument types and maturities. Importantly, debt portfolio decisions are not only made under fundamental uncertainty regarding future market developments, there exists also an inherent uncertainty regarding how to design the respective decision-making framework. Therefore, despite its high importance, there is no consensus on the best approach to determine instrument choice and portfolio structure in debt management.
Even for the largest and most liquid sovereign debt markets of OECD members, there are stark differences in the decision-making processes. Some issuers rely on complex quantitative optimisation procedures to implement the best portfolio structure in the cost-risk space. Other issuers follow approaches that are primarily led by the demand for debt instruments as stated by primary dealers, end investors and other market participants, and as indicated by operational metrics.2
Due to the severe challenges and constraints Ukraine is currently facing, in the foreseeable future its portfolio strategy decisions and the choice of instruments can only follow a highly pragmatic approach led by what is possible and not by what could theoretically be optimal in the longer run. However, Ukraine should work towards three broad goals in the medium to long term, especially after the end of martial law:
1. developing the local currency market, to be able to gradually and smoothly replace grants and concessional finance as the dominant form of financing and to limit foreign currency risk
2. continuing to lengthen the portfolio duration of marketable debt to reduce refinancing risk
3. aiming for a more diversified holding structure to achieve a higher resilience to idiosyncratic shocks and changes in investor preferences.
4.3.1. Current context and challenges
Maturity structure and investor base for Ukrainian government debt
While the average time to maturity of Ukraine’s public debt of 12 years is long compared to other issuers (Ministry of Finance of Ukraine, 2025[7]), this is mostly driven by concessional loans with longer terms (Figure 4.2). In addition, all the currently outstanding domestic currency bonds with maturities higher than ten years are inflation-linked instruments which haven’t been issued by Ukraine since 2017.
Note: As of 01.05.2025
Source: Ministry of Finance of Ukraine (2025[8]), “Ukraine: Debt Dynamics in Times of Uncertainty”, https://www.mof.gov.ua/storage/files/Ukraine%20Debt%20Dynamics%20in%20times%20of%20uncertainty%20-15-May-2025-fv.pdf.
The holding structure of domestic debt is currently heavily dominated by the NBU (37%) and domestic commercial banks (46%, Figure 4.3). As discussed in Chapter 2, on the macroeconomic level, these holdings are mirrored by bank deposits of domestic private non-banks and especially households. A key objective for the coming years will therefore be the smooth diversification of the investor base, which doesn’t cause increases in debt servicing costs or too much secondary market volatility.
Note: As of 08.05.2025
Source: Ministry of Finance of Ukraine (2025[8]), “Ukraine: Debt Dynamics in Times of Uncertainty”, https://www.mof.gov.ua/storage/files/Ukraine%20Debt%20Dynamics%20in%20times%20of%20uncertainty%20-15-May-2025-fv.pdf.
Key challenges
Under the current conditions, there are significant challenges in the medium term:
1. There is high uncertainty for investors regarding the future development of Ukraine’s political, economic, and fiscal situation. This limits the range of investors willing to hold Ukrainian debt instruments and currently renders the issuance of longer-duration debt instruments at manageable rates infeasible.
2. There is structurally low demand from domestic institutional investors such as pension funds and insurance companies (see Chapter 2).
3. Structural foreign demand for Ukrainian bonds can only be expected when Ukraine is included in the largest international bond indices.
4. While it therefore seems natural to rely on targeting private households, this could partially crowd out demand for private domestic financial assets due to limited household savings.
5. Although a gradual reduction of the NBU and domestic private bank holdings of Ukrainian government bonds seems desirable in the longer run, this will put additional pressure on the issuer to find alternative demand.
Ukraine’s room for manoeuvre regarding the portfolio strategy and the choice of debt instruments is therefore narrow. Based on the aims and limitations described above, the following recommendations could be considered.
4.3.2. Strengthening the local currency curve
Given the severe constraints Ukraine is currently facing, the lowest risk strategy to follow is that of other emerging markets, which have focused on strengthening the local currency market to limit foreign currency exposure (OECD, 2025[9]). A sound domestic bond market can be defined by the following features:
a smooth yield curve characterised by well-functioning price discovery
ample secondary market liquidity allowing for large transaction volumes with minimal price impact,
low market volatility, except for when significant exogenous drivers like monetary policy impact the market
a maturity structure that serves both investors’ needs and the DMO’s strategic aims for its debt portfolio
If these characteristics are fulfilled, the issuer should benefit from benchmark and liquidity premia, leading to lower interest rate costs. Importantly, a well-functioning domestic bond market can also enhance the functioning of the whole financial system (see Chapter 2).
A regular and predictable issuance strategy is a core building block to strengthen the local currency bond market (OECD, 2025[9]). With regular auctions, a smooth and well understood auction process, and a transparent issuance calendar, Ukraine is already following this approach. The focus for the coming years should be to support secondary market liquidity and carefully extend the maturity structure. Improving the secondary market liquidity could specifically be achieved by regular reopenings and strategic buybacks of existing securities, something else Ukraine is already undertaking.
However, given the current constraints and uncertainties, a portfolio strategy optimised for the long run cannot be achieved in the near to medium term. Therefore, the Ukrainian DMO needs to proceed cautiously and incrementally, especially focusing on demand based on investor feedback, key operational metrics, and secondary market performance. As far as possible, the strategy should follow a regular and predictable approach to ensure the reliability of the debt management decisions and to foster trading activity in the secondary market.
One of the main obstacles for deepening the local bond market lengthening the maturity structure is the low structural demand for long-term debt instruments from domestic institutional investors. Demand will rise only if the role of asset-back pension solutions and life insurance products is strengthened (see Chapters 2 and 6). Greater engagement from institutional investors would be an important step to diversify the investor base, potentially also allowing for the increased issuance of higher-duration instruments. Even though it is not yet foreseeable when and to what extent a larger commitment from institutional investors can be reached, Ukraine’s debt management function should seek close contact with potential investors and strategically plan to broaden its offering of instruments.
4.3.3. Introducing ESG bonds to diversify the investor base
The Ukrainian authorities should consider the introduction of environmental, social and governance (ESG) bonds. As reported by several OECD DMOs, these securities can attract different investors compared to conventional bonds, thereby broadening the investor base and potentially altering the cost and risk trade-offs (OECD, 2024[10]). ESG instruments could be especially useful for Ukraine as the country’s post-war reconstruction will require enormous amounts of public investment, leading to a large number of ESG-related projects to be funded.
In comparison to alternative instruments (see below), fixed-rate ESG instruments have the advantage that they don’t necessarily reduce the liquidity of the benchmark curve. Empirical research has found that the premium investors pay for green bonds, the so-called greenium, is typically low, on average 4 basis points for advanced economies and 11 basis points for emerging markets (Ando, 2024). While this implies a fairly small cost advantage for the issuer, it also means these bonds usually fit well into the benchmark curve of conventional government bonds and can even serve as substitutes for them without reducing overall liquidity.
However, the identification of eligible expenditures, in the case of the use of proceeds structure, and the additional documentation and reporting associated with issuance, involve additional costs and operational demands. They can also reduce fiscal flexibility, as funds must be spent in accordance with the framework, which will necessarily preclude certain types of expenditures. Meanwhile, if an index-linked structure is adopted, such as a sustainability-linked bond, this can also increase debt portfolio risks or costs. This can create asymmetric risks to the issuer, with the final payment profile ultimately unknown in advance.
Given the enormous amount of financing needed for Ukraine’s reconstruction, ESG financing seems to be a promising avenue despite some of the potential disadvantages. They can attract additional investors and strengthen the reputation and visibility of the Ukrainian state as an issuer. Nevertheless, a comprehensive assessment is required to ascertain if the benefits would outweigh the costs and risks.
4.3.4. Consider expanding the retail programme to offer digital access to non-marketable products.
Retail investors can be an important source of funding, adding stability and diversification to demand. They can also provide the Ukrainian diaspora with an easy mechanism to invest in their home country (Foxall and Policino, 2025[11]). During the last few years, the Ukrainian government has made substantial progress in this area, which it could build on to further stimulate the role of retail investors in its sovereign debt market. Although Ukrainian banks have successfully launched efficient and easy-to-handle mobile apps and websites for retail customers to invest in domestic government bonds, retail holdings for government debt securities still account for only about 5% of total retail deposits in banks, as retail investors currently prefer to hold bank deposits (NBU, 2024[12]).
As laid out in Chapter 2, the holdings of bank deposits are mirrored to a large part by banks’ holdings of government debt, which thereby engage in maturity transformation and profit from the spread between deposit interest rates and the return on government debt securities. One reason that retail investors refrain from investing in government securities might be financial market volatility and limited experience investing in market securities.
A potential measure to attract additional demand is therefore to expand the retail programme to enable digital access to a fixed-term non-tradable retail programme similar to the Austrian Bundesschatz programme (Foxall and Policino, 2025[11]; Republic of Austria, 2026[13]). This could also be used to extend the maturity structure of the debt portfolio without having to consider liquidity issues that would presumably arise with longer-term marketable instruments.
Besides additional administrative costs, there is a risk that such instruments could at least partially crowd-out the demand for bank deposits and/or marketable securities. While, in principle, replacing bank deposits with increased direct holdings of government debt instruments can be seen as favourable, particularly from a debt management perspective, these side effects and their potential scale should be taken into account when considering the introduction of non-marketable retail debt instruments.
4.3.5. Complementary higher-risk instruments could be considered
While increasing portfolio diversification, alternative debt instruments can drain liquidity from the core instruments, thereby depressing liquidity premia. Therefore, Ukraine should prioritise building and extending the yield curve for local currency fixed-rate instruments, as discussed above. However, market conditions and public financing pressures may make it appropriate to consider deploying a wider range of debt instruments. This subsection therefore discusses the potential role of foreign currency and inflation-linked bonds. However, a comprehensive cost-risk assessment of the choice of debt instruments is beyond the scope of this report and depends on the current market environment and investor demand.
Foreign currency debt
Due to the predominance of concessional financing since the start of the war, about 80% of Ukraine’s government debt is denominated in foreign currency (Ministry of Finance of Ukraine, 2025[14]). In principle, Ukraine could also rely more heavily on issuance of market-based financing in foreign currency. Foreign currency debt can provide the advantage of being less costly than comparable local-currency instruments. However, the inherent exchange rate risk can make the effective costs considerably higher than anticipated at issuance (OECD, 2025[9]). Importantly, the risk tends to be procyclical. Phases of increased investor risk perception and therefore, depressed exchange rates tend to coincide with downturns in the domestic economy. This implies that debt servicing costs are higher when government finances are more strained (Fujii, 2023[15]). In light of the persistent economic and geopolitical uncertainties Ukraine is likely going to face even after the war, it is prudent to adopt a risk-averse public debt management strategy.
Inflation-linked bonds
Inflation-linked bonds can be advantageous in three regards. First, they can lower debt costs if investors are willing to pay a premium for the embedded inflation protection which can also allow for issuance at longer maturities. Second, they can underline Ukraine’s commitment to achieve low inflation, thereby increasing credibility. Third, tax receipts that tend to increase in times of elevated nominal GDP growth can provide a countercyclical offset to elevated debt servicing costs due to increased inflation. That said, inflation-linked bonds carry the downside of increasing the riskiness of the debt portfolio as unexpected increases in inflation can lead to significantly increased debt service costs (OECD, 2024[10]). Due to the exogenous nature of the geopolitical risks Ukraine will likely face for a prolonged period of time, inflation risks to a large part cannot be controlled by the Ukrainian authorities.
Recommendation 3: Focus on building and extending a liquid and smooth local currency curve.
Recommendation 4: Assess the case for issuing ESG or other labelled bonds to attract additional investor demand.
Recommendation 5: Assess the case for expanding the retail programme to offer digital access to non-marketable products.
Ukraine’s stated aim for its cash management function is to ensure that payment orders of administrators and recipients of budget funds, as well as other clients of the Treasury, are executed in a timely manner. Under martial law, receipts (i.e. tax and non-tax domestic revenues, proceeds from the issuance of domestic government bonds and Eurobonds, grants, and loans from multilateral and bilateral creditors) flow into the treasury single account (TSA), and stay in the TSA until they are spent.
Thus, Ukraine does not have an active cash management function. An active cash management function refers to the regular use of market instruments such as repo (repurchase agreements) to actively steer the level of liquidity held. In this framework, cash managers raise and place liquidity via the short-term money markets, aiming at leaving a relatively small balance in the TSA at the end of each trading day. Such an approach requires a cash flow forecasting process and system that all central government accounting units use to forecast their revenues and expenditures. Within the OECD, and amongst partner countries, there exists a large range of arrangements for collating the cash flow forecast.
In some countries, expenditure forecasts, for example, are compiled centrally by the budget office and then passed to the cash management team (e.g. Austria, Hungary, Italy, and the United States). In contrast, in other countries, data collection depends more on direct communication between the cash management team and line ministries (e.g. Belgium, Brazil, Japan, and Türkiye). Additionally, in some instances, the cash management team is responsible for estimating certain expenses, such as discretionary expenditures (e.g. Brazil).
Some countries have legal or quasi-legal frameworks stipulating the frequency and type of data to be shared, including Brazil, Hungary, New Zealand, and the United States. For example, Brazil’s "responsibility matrix", established by the Budget Execution Board and created by a presidential decree, determines which government bodies are responsible for providing forecasts of revenues and expenditures. These updates are submitted bi-monthly, in line with the Fiscal Responsibility Law. Similarly, in Hungary, budgetary entities face penalties for failing to provide timely or accurate forecasts to the State Treasury (OECD, 2025[16]).
Although many OECD member countries don’t have an active cash management function, most European members, and almost all Eurozone members, do (OECD, 2025[16]). The benefits of an active cash management function include:
greater fiscal flexibility as cash can be raised at relatively short notice,
greater cost effectiveness as superior returns can be made on surplus cash lent into the market, and disparities in revenues and expenditures can be more smoothly offset,
support for the development of the short-term money markets, as the government will typically be a large player, borrowing and lending in large volumes, which supports liquidity.
easier access to deposits from other public institutions to operate market management facilities, such as a DMO standing repo facility.
4.4.1. Strengthening the cash and liquidity management functions
In the future, Ukraine’s cash management function will ideally have more flexibility to act and more tools with which to act to bring it more in line with its regional EU-linked peers3. Possible tools for consideration could include T-bills, repos, and commercial paper to manage fluctuations in cash needs (OECD, 2025[16]). Some of the possible steps needed to add more flexibility and make use of more tools include:
strengthening legislation on active public debt transactions
developing the domestic securities exchange and capital market infrastructure (as discussed in Chapter 3)
carrying out active operations with government debt, in particular exchange and repo transactions in government bonds
adopting a frequent T-bill programme and establishing the scope for T-bill issuance for funding and balance shortages
implementing regulation on the use of temporarily free funds in the TSA to cover temporary cash gaps of the general fund of the state budget within the budget period, and the assignment of temporarily free funds of the TSA to the sources of budget funding
introducing liquidity management tools to ensure successful payments by administrators to recipients of budget funds, as well as other clients served by the Treasury, in case of insufficient funds in the TSA
carrying out analysis and preparing proposals on the coordination of terms of significant revenues and expenditures of the state budget (information sharing with the tax authorities is essential here; for example, information on the provision of average tax refunds would be helpful)
creating opportunities to obtain short-term loans from commercial banks in case of insufficient funds
actively managing the minimum balance on the TSA, with a target range to take account of the risks of shortfalls and expected receipts not materialising
exploring the use of derivatives for risk management purposes (FX and IRD)
4.4.2. Examples of new and emerging tools
Table 4.3 provides an overview of new and emerging tools available to public debt managers for enhancing cash and liquidity management based on the related cash management objective. It also describes some of the potential drawbacks of each tool.
Despite some of the drawbacks and the clear need for human oversight, the use of AI does allow for greater scale as it can encompass more inputs. It enables for more regular updates as forecasts can be automatically regenerated when new information becomes available. Additionally, with generative AI models’ pattern recognition, risk detection, and the ability to learn from every forecast cycle and refine automatically should improve accuracy, particularly over time. Automating data collection and forecasting also saves hours of manual spreadsheet work, which will free up staff time. A few OECD countries are testing the use of AI in cash flow forecasting.
Meanwhile, the use of CBDCs and DLT could support the efficiency of cash and liquidity management by enabling real-time visibility, instant settlement, and programmable liquidity management, and could even facilitate cross-border and multi-currency operations. However, given the implementation challenges, which include cybersecurity design, interoperability with legacy systems, and the need to update governance and legal frameworks, testing on a small scale, making use of pilots/sandboxes, would be an appropriate first step. A few OECD sovereign issuers have tested DLT systems for use in debt management.
Recommendation 6: Pilot AI-enhanced forecasting tools to sharpen the precision of cash flow forecasting.
Recommendation 7: Monitor technological advances, for example in DLT/CBDC innovations, and trends applicable to cash and liquidity management, and consider testing small-scale pilots/sandboxes.
Explicit and implicit contingent liabilities are growing rapidly in Ukraine and could have a substantial impact on public debt sustainability. These include contingent liabilities linked to the banking sector, and the deposit guarantee fund, as well as guarantees linked to business loans as discussed in Chapter 2.
This section provides recommendations to improve the management of contingent liabilities and guarantees, to reduce the fiscal and funding risks they pose.
4.5.1. Context
Contingent liabilities can materialise in various conditions. One of these is when a country faces a financial crisis, where the state is called on to provide capital injections to stabilise the financial system. Another is where the state has a financial interest in specific financial institutions, such as state-owned banks. Where such an entity faces financial hardship, the state may face pressure to provide financing to stabilise the entity.
As discussed in Chapter 2, the Ukrainian government has a financial stake in seven banks, which are partially or wholly state-owned and represent more than half of the sector’s total assets. This could be a source of fiscal risk in the case of a systemic financial crisis or large-scale crisis in one of the major banks. For example, PrivatBank, the largest commercial bank in Ukraine, was nationalised in 2014, following a major capital shortfall, which led to the need for capital injections financed by the issuance of domestic government bonds.
In addition, contingent liabilities risk could also arise if the Deposit Guarantee Fund (DGF) faces a shortfall in funding, which may take place in case of a crisis in the banking sector. It is worth noting that the DGF has a range of measures in place to support its financial position in such a scenario. However, the fiscal costs of a systemic banking crisis could be so high that it takes years of collaboration between the debt manager and the deposit insurance institution to pay out or roll over the related financial liabilities.
In this regard, Mexico is a good example: the 1995 crisis left the deposit insurance institution (IPAB) with a stock of liabilities funded from the markets through bond issuances guaranteed by the Mexican Congress. The fiscal burden of this crisis still continues and necessitates coordination between the DMO and the IPAB in the bond markets 30 years after the crisis. Türkiye is another example of such an experience, in which case it took almost 10 years to redeem the securities issued to back the deposit insurance system.
4.5.2. Renegotiating existing debt and guarantee obligations
Additional contingent liability risks stem from Ukraine’s domestic government bonds issued to cover past recapitalisation of state banks and SOEs during the financial crisis in 2013-14. These securities are largely foreign exchange-linked bonds and represent approximately 7% of Ukraine’s total public debt.
Ukraine should continue to prioritise the renegotiation of these obligations to support financial viability, unlock further grants and concessional financing from international partners, and where possible, reduce the near-term debt pressures it faces.
4.5.3. Enhancing the role of the public debt management function in monitoring public guarantees
From a public debt management perspective, the effective management of fiscal risks arising from contingent liabilities is a key concern. The realisation of these risks has direct consequences for the fiscal position and thereby public debt managers’ debt and cash management policies and operations (OECD, 2017[17]). Often, any realisation of the risk associated with contingent liabilities will not be reflected in forecasts or accounted for in a reserve account. This can lead to unexpected financing needs which are difficult for public debt managers to plan for.
It is therefore important to strengthen the institutional and legal infrastructure for public guarantees, as discussed in Chapter 2. The debt management function, particularly where it has responsibility for managing government cash flows, can be uniquely placed to assess fiscal risk. In addition, decision makers who authorise guarantees (in Ukraine’s case, the CMU) must be informed of the level of market access when determining the volume of guarantees that can be outstanding at any one time. Given its active role in the issuance and management of the government debt portfolio and its regular interactions with market participants, the debt management function is well placed to provide this service.
OECD analysis shows that public debt managers assume certain roles and responsibilities in contingent liability management, while the degree of involvement differs widely across countries. The OECD also observes that the involvement of debt managers is more prominent in government credit guarantees (explicit contingent liabilities), while contingent liabilities arising from public-private partnerships (PPPs) and government-sponsored insurance programmes appear to be mostly outside the domain of public debt managers in most cases.
The development of methodological guidance to assess the risks arising from contingent liabilities, to which Ukraine has already committed as part of the extended arrangement under the extended fund facility with the IMF (IMF, 2025[18]), could be implemented by handing responsibility to the debt management function to cover the risk management of contingent debt alongside direct debt, enabling an integrated portfolio approach to risk management.
This would require the development of a function to monitor the credit guarantee portfolio, with particular attention given to the financial health of the banking sector, given the prominence of state-owned banks as well as the fiscal risk posed by the potential need for a recapitalisation of the Deposit Guarantee Fund. A well-developed and integrated middle office in the debt management function could serve this function (see Section 4.2.2).
Ukraine could therefore consider giving the public debt function a greater role in advising on the prudent level of guarantees that can be issued in different time periods, based on market conditions and the capacity to absorb contingent liabilities if and when they materialise. There could also be a specific responsibility for the middle office to provide risk management of the credit guarantee portfolio.
4.5.4. Other recommended practices to consider
Below are some examples of what the OECD considers to be best practice in the management of contingent liabilities and credit guarantees. These are not all followed or implemented by all OECD members, but serve as an indication of what best practice could look like:
Cost and risk analysis is conducted before guarantees are issued.
Fees are charged at levels covering at least the expected associated costs.
The limits of the guarantee in terms of time and scope are clearly defined.
A ceiling is applied to the overall levels of outstanding guarantees at any one time.
Contingency reserve funds are used to enhance the government’s ability to cover possible future losses/additional costs.
A regular consolidated report covering outstanding guarantees and an assessment of the current state of contingent liabilities is produced.
Governments also often consider the economic value and potential distortionary effects of guarantees. Equally, there is always a trade-off between supporting businesses and protecting the treasury. This is reflected in the following parameters:
the decision whether to extend a guarantee and to which institution/person
the scope of the guarantee in terms of amount and risk-sharing
the pricing of fees
Standardisation of contracts/process is generally adopted and desirable, but there are always instances when governments may want flexibility/discretion around this. Still, there needs to be a framework in place to cover such an eventuality, as full discretion would entail huge moral hazard and potential risks arising from conflicts of interest.
Box 4.1 and Box 4.2 provide case studies for how public contingent liabilities and credit guarantees are managed in Poland and Sweden, respectively.
Poland’s rules for the granting of guarantees are either through a ‘top-down’ authorisation process or the imposition of a particular law. Credit guarantees, issued according to the rules of the Polish Guarantee Act are granted following the positive outcome of an application; these are typically granted to investment projects in infrastructure.
There are also particular guarantees which are granted by law. These currently entail financial obligations made during the covid pandemic, necessary military development or other extraordinary cases. For these guarantees, Parliament creates the law, stating that related guarantees are granted without the need for authorisation. These guarantees are administered and reported on in the same way as authorised guarantees.
All guarantees are subject to individual and annual aggregate limits, have to be granted for a specific, stated purpose, and must have expiration dates. For investment guarantees, the general rule is that fees for commercial projects are charged at ‘commercial rates’. However, most guarantees granted in Poland do not entail fees, as they support projects of ‘national importance’.
Risk management
There are multiple elements, which are used to limit risk, including:
posting of collateral
risk-sharing with the entity
covenants in any debt agreement, like the ‘meeting’ of certain financial indicators.
There are also rules forbidding the granting of ‘state aid’’ and also a restriction prohibiting the granting of new guarantees when the ratio of public debt to GDP exceeds 60%.
Monitoring the guarantee portfolio
The guarantee portfolio is monitored to assess risk, including any expected losses. Any possible pay-outs from guarantees are included in the Budget Act. As for law-imposed guarantees, the relevant law will instruct that the debtor will receive any funds from the state budget necessary to meet its financial obligations (without the guarantee being ‘called’).
Source: Polish Ministry of Finance
Sweden’s approach to granting guarantees is ‘top-down’, as depicted below. Authorisation can be for a programme with a total guarantee limit for a specific purpose, for example export credit guarantees, or for one single guarantee.
Fee-setting
Fees are charged at a level that covers at least the total expected costs associated with the guarantee or loan. These include the total cost of administrative fees, fees for expected losses, and if relevant, fees for any market risk premium, funding costs, and on-lending.
The Swedish Parliament can set the fee level below the total expected cost but has to make up the difference by allocating government funding. This funding is then recorded as a subsidy under central government expenditure. The total fee (including any subsidy) is deposited into a notional reserve account with the Swedish National Debt Office (SNDO). Any losses on guarantees are financed from this account.
Risk management
There are multiple elements to the scheme, which are used to limit risk, including:
Covenants:
Financial (to prevent the company from taking on excessive risk)
Corporate (to limit management risk)
Tranches – the guarantee is issued in tranches, with each tranche released only following the fulfilment of certain requirements
Collateral – an upfront financial commitment from the relevant entity
Risk-sharing with the entity
Approach to monitoring the guarantee portfolio
The guarantee portfolio is monitored in accordance with Sweden’s Budget Act. Any expected losses are determined for the remainder of the guarantee using a ratings-based approach or a simulation model. The P+L statement is adjusted by write-downs for provisions for guarantees. Each government agency involved reports on guarantees as part of its annual reporting requirements, and guarantees are also included in the annual report for the government sector. The SNDO co-ordinates all the reporting of guarantees and is also responsible for an annual report on the total contingent liabilities of the Swedish government, including on any unexpected losses.
Source: Swedish National Debt Office
4.5.5. Additional measures to strengthen contingent liability management
In addition to the state-guarantee commitment ceiling,4 the introduction of a contingency reserve fund for the purpose of funding needs arising from credit guarantees can help reduce the potential consequences of the latter on debt and cash management operations. The financing costs of such a fund would, however, make it economically unviable. It is also worth noting that such an approach is not widely adopted in the OECD area.
Other areas for consideration to improve risk management include:
regular consolidated reporting of contingent liabilities, including an updated assessment of default risk – for example Poland’s risk portfolio is classified into four categories of risk (low, medium, increased and high) and is updated every quarter
transparency in the methodology used to price any fees levied for the provision of guarantees
partial or full collateralisation of any guarantees
a description of the mechanism for partial recovery of funds in the event of crystallisation
clear policy guidance around the approach to assessing the trade-offs between supporting businesses and protecting the treasury
A final longer-term consideration for Ukraine might be alignment with EU state aid rules and regulations, which naturally places certain constraints on the provision of guarantees, with a view to closer alignment with the bloc.
Recommendation 8: Pursue the renegotiation of outstanding external public and publicly guaranteed debts and contingent liabilities.
Recommendation 9: Maintain updated registers for all state guarantees on the MOF’s website, and move to regular consolidated reporting of all measured contingent liabilities.
Recommendation 10: Update the methodological guidance for assessing fiscal risks in key spending areas and contingent liabilities, including PPPs, guarantees, local governments, and SOEs, and publish the methodology used to price fees.
Recommendation 11: Consider giving the debt management function a greater role in advising on the provision of guarantees, and make the middle office specifically responsible for the risk management of the guarantee portfolio.
References
[20] Audet, N. et al. (2025), The Dynamic Canadian Debt Strategy Model, https://www.bankofcanada.ca/2025/08/technical-report-127.
[11] Foxall, S. and L. Policino (2025), Sovereign retail debt programmes and instruments, OECD Publishing, Paris, https://doi.org/10.1787/e2a782d0-en.
[15] Fujii, E. (2023), “Currency concentration in sovereign debt, exchange rate cyclicality, and volatility in consumption”, Economics, Review of World, https://link.springer.com/article/10.1007/s10290-023-00493-6.
[18] IMF (2025), Ukraine: Eighth Review Under the Extended Arrangement Under the Extended Fund Facility, https://www.imf.org/en/Publications/CR/Issues/2025/06/30/Ukraine-Eighth-Review-Under-the-Extended-Arrangement-Under-the-Extended-Fund-Facility-568152.
[7] Ministry of Finance of Ukraine (2025), Medium-Term State Debt Management Strategy for 2026-2028, https://mof.gov.ua/storage/files/Medium-Term%20State%20Debt%20Management%20Strategy%20for%202024-2026.pdf.
[14] Ministry of Finance of Ukraine (2025), Presentation at the JP Morgan Emerging and Frontier Markets Opportunities Conference, https://mof.gov.ua/storage/files/JP%20Morgan%20Conference%20-%20Sep%202025%20(1).pdf (accessed on 14 January 2026).
[8] Ministry of Finance of Ukraine (2025), Ukraine: Debt Dynamics in Times of Uncertainty, https://www.mof.gov.ua/storage/files/Ukraine%20Debt%20Dynamics%20in%20times%20of%20uncertainty%20-15-May-2025-fv.pdf.
[3] Ministry of Finance of Ukraine (2025), Ukraine’s State Budget Financing Since the Beginning of the Full-scale War, https://mof.gov.ua/en/news/ukraines_state_budget_financing_since_the_beginning_of_the_full-scale_war-3435.
[5] Ministry of Finance of Ukraine (2019), “Medium-Term State Debt Management Strategy for 2019-2022”, https://www.oecd.org/en/publications/2025/01/mapping-ukraine-s-financial-markets-and-corporate-governance-framework-for-a-sustainable-recovery_ba6fc369/full-report/public-debt-management-in-ukraine_8a2a010c.html#Min19_f57b31e6f7.
[12] NBU (2024), Financial Stability Report, https://bank.gov.ua/en/news/all/zvit-pro-finansovu-stabilnist-gruden-2024-roku.
[16] OECD (2025), Managing Government Cash: A Review of Practises in OECD Countries, OECD Publishing, Paris, https://doi.org/10.1787/7675eb58-en.
[4] OECD (2025), Mapping Ukraine’s Financial Markets and Corporate Governance Framework for a Sustainable Recovery, OECD Publishing, Paris, https://doi.org/10.1787/866c5c44-en.
[9] OECD (2025), OECD Global Debt Report 2025, OECD Publishing, Paris, https://doi.org/10.1787/8ee42b13-en.
[2] OECD (2025), Ukraine’s narrow path to debt sustainability, OECD Ecoscope, https://oecdecoscope.blog/2025/05/21/ukraines-narrow-path-to-debt-sustainability/.
[10] OECD (2024), OECD Global Debt Report 2024, OECD Publishing, Paris, https://doi.org/10.1787/91844ea2-en.
[6] OECD (2020), OECD Sovereign Borrowing Outlook 2020, OECD Publishing, Paris, https://doi.org/10.1787/dc0b6ada-en.
[17] OECD (2017), The role of public debt managers in contingent liability management, OECD Publishing, Paris, https://doi.org/10.1787/93469058-en.
[13] Republic of Austria (2026), Bundesschatz, https://www.bundesschatz.at/ (accessed on 14 January 2026).
[1] SIPRI (2026), Military expenditure (% of GDP) - Ukraine, https://data.worldbank.org/indicator/MS.MIL.XPND.GD.ZS?locations=UA (accessed on 14 January 2026).
[19] US Treasury (2026), Treasury Borrowing Advisory Committee (TBAC), https://home.treasury.gov/policy-issues/financing-the-government/quarterly-refunding/treasury-borrowing-advisory-committee-tbac (accessed on 14 January 2026).
← 1. Most OECD DMOs have separate debt and cash dealing desks.
← 2. Examples of these different approaches are Canada und the US. While Canada employs comprehensive quantitative models to inform its portfolio decisions (Audet et al., 2025[20]), the US DMO’s decisions are primarily characterised by a neat cooperation with the market participants represented by the Treasury Borrowing Advisory Committee (US Treasury, 2026[19]).
← 3. As set out in Ukraine’s Medium-Term State Debt Management Strategy for 2024-2026 Ukraine’s EU linked peers include Bulgaria, Croatia, Cyprus, Czechia, Hungary and Poland.
← 4. One of the Quantitative Performance Criteria (QPC) established by the EFF with the IMF puts a ceiling on the level of state guarantees Ukraine can commit to in 2025 of UAH 64.36 billion. It also commits Ukraine to strengthen the link between the fiscal risks assessment and the predictability of government spending, and to develop methodological guidance for assessing fiscal risks in key spending areas and contingent liabilities, including PPPs, state guarantees, and SOEs. Ukraine has also committed to retaining adequate space against this ceiling to facilitate guarantees on loans from IFIs and foreign governments for projects, including those for recovery and reconstruction. Meanwhile the ceiling will be subject to an automatic upward adjustor for guarantees signed for selected projects financed by the multilateral and bilateral donors (e.g., The World Bank, European Investment Bank, the EBRD and the KfW).