Since the issue of financing the budget is very acute, and Ukraine’s dependence on external financial assistance is serious both economic and political risk, it is important to improve the existing system of internal borrowing, which, unfortunately, has not earned in full force in 30 years. The market of domestic state loan bonds (OVGZ), possessing significant potential for mobilizing national savings, has not yet become a full -fledged alternative to external financing even during the war, when for three years the population spent nine times more funds to buy foreign currency than invested in the OVVZ. This imbalance requires system analysis and balanced solutions.
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In March 2025, it turned 30 since the start of the market of the internal state loan bonds. During this time on the market, the government placed an OVGZ worth more than 3.3 trillion UAH. In the first years of the functioning of this market, the amount of raising funds from it were insignificant (see. rice. 1). But in 1997-1998, the volumes of gross placement of OVZZ already reached 8% and 9.5% of GDP. Such volumes took place in 2019–2020 and 2023–2024. That is, the relative dimensions of the OVGZ market (when comparing with the country's GDP) have been only at the level of 1997-1998 over the past six years. And the volumes of net-submissions in 2023 and 2024 (2.8–3.4% of GDP) even lagged behind the same indicator of 1997-5.3% of GDP.
The largest flowering of the OVGZ market was observed in 2012-2014 - before the start of the military aggression of Russia against Ukraine. The amount of gross borrowing reached 16.2% of GDP in 2012 and 14.5% of GDP in 2014. The prerequisites for the rapid development of the OVGZ during this period were macroeconomic stabilization, an increase in investors' trust in government securities, as well as the onset of the emission of foreign exchange ATVs and the OVGZs indexed for changes in the currency course. The maximum volume of net-storage in the entire history of the market was recorded in 2012-11.4% of GDP.
During the formation of the OVGZ market, the share of the budget deficit, which was funded by attracting from this market, gradually increased from 6% in 1995 to 39% in 1996, then to 80% in 1997 with a gradual decrease in 1998-1999 (the period of the Asian financial crisis). The indicators of the “mature” OVGZ market are less optimistic: the share of the budget deficit, which was covered from this market, was 32–34% in 2021–2022 and 14–19% in 2023–2024.
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Thus, over 30 years of existence, the domestic market of state loans, unfortunately, did not become a dominant source of financing of the budget deficit. The reasons for this are both a low level of national savings and a deficiency of confidence in market entities to the reliability of state securities.
Due to the indicated reasons and during the war, the main source of covering the financial needs of the government was external loans and grants, and not internal loans. In particular, in 2024, the budget received UAH 256 billion from net-blessings in the domestic market and 1647 billion UAH from external borrowing and grants.
It is known from the theory that the capacious and liquid market of the government’s internal debt obligations creates the conditions for reducing the risks of the state debt position (by eliminating the inconsistency between the currency of obligations and assets of the government) and reducing the cost of serving debt in the long -term prospect. In particular, the full functioning of the domestic market of state securities allows you to reduce currency risks, interest risks and risks of debt prolongation. Government bonds often play the role of a key landmark for interest rates on different segments of the financial market, which facilitates the pricing for all types of financial instruments. That is why the large -scale and effective market of internal borrowing of the government usually positively affects the development of the country's financial system.
A significant progressive step was the accession of Ukraine in 2019 to the Clearstream International Depository System, which repeatedly increased the potential base of investors in OVGZ and contributed to a deeper integration of the Ukrainian securities market in the world. Although the influence of this factor has made Ukraine more vulnerable to overflows of foreign speculative capital.
Thanks to the support of the World Bank, to date, the primary market of the OVVZ meets the best international practice of organizational and technical support of processes in this market. Now, individuals and legal entities of Ukraine have the opportunity to buy OVGZ both through authorized banks and through various digital sites, in particular through the " Throughout 2022–2024, individuals increased their OVGZ portfolio by 53.4 billion UAH.
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Of the negatives, it is worth noting the chronically high profitability of the OVZ in nominal and real expressions. This is primarily due to the high key rate of the NBU and the constant pull-up of the OVGZ-boards to the level of bets on passive operations of the National Bank. In addition, the instability of demand for oats by banks due to the functioning of the competing market of deposit certificates of the NBU is also affected.
High profitability of the OVGZ has significant costs to the budget of a warring country. The expenses of the budget for the payment of interest on internal debt are growing all the time: from 102 and 124 billion UAH in 2021–2022 to 206 billion in 2023 and 213 billion UAH in 2024. For comparison: in 2024, financing of the general state budget fund under the program “Development, purchase, modernization and repair of weapons, military equipment, funds and equipment” amounted to UAH 454 billion (only twice the percentage payments for OVGZ).
The weighted average nominal rate of the OVVZ during the initial placement in 2022 was 12.7% per annum, in 2023-18.7, and in 2024-16% per annum. The real profitability of hryvnia oats in the first year of the Great War was negative, but since April 2023 it became positive and has acquired a clearly defined ascending trajectory with the achievement of anomalous values \u200b\u200bof profitability. The maximum level of real rates on the OVGZ was recorded in March-April 2024-14% per annum. In the future, real rates gradually decreased, but remained in the zone of positive values \u200b\u200b(see. rice. 2).
It is significant that in developed countries during the Second World War the nominal level of bets on domestic loans of governments was very low and did not exceed 4% per annum (Interwar Debt Database). For example, in the United States in 1940-1945, interest rates for bonds with a urgency of one year or more were at the level of 2.1–2.2% per annum, in the UK - 2.7–3.0% per annum. Even in Germany, bets ranged from 3.6 to 4% per annum. In addition, the real percentage rates of Ex Post by bonds (nominal rates minus the actual pace of inflation) were negative in the UK, Belgium, France, Japan and partly in the United States.
The high cost of borrowed funds in Ukraine reduces the defense capacity of the state, and also limits the authorities of the government to conduct a stimulating policy of supporting the real sector and undermines the debt stability of public finance.
The low degree of confidence of Ukrainians to the national monetary unit and the substantial dollarization of savings are negatively affected by the OVGZ market.. So, from the beginning of a large war to March 2025, the population spent 634 billion UAH to buy foreign currency. And to the growth of urgent hryvnia deposits in banks and portfolios of the OVGZ, the population sent UAH 132 billion, including UAH 69 billion in OVVZ. That is, the conclusion of national capital to foreign currency for three years of the war by nine times exceeded their investments in the OVVZ.
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In general, the financial assets of enterprises and the population in hryvnias reached 9.5 trillion UAH as of the beginning of 2025. At the same time, financial assets increased from 90% of GDP in 2021 to 123% of GDP in 2024. However, the structure of financial assets is extremely unfavorable: about 60%, or 5.7 trillion UAH, are invested in cash foreign currency, while only 3% of assets, or 277 billion UAH in OVGZ (see. rice. 3). In addition to OVGZ and currency, bank deposits account for 29% of the total assets, and 8% for cash hryvnias outside of banks.
The composition of investors in the OVGZ over the entire period of the existence of the market has become a more diversified. The structure of the OVGZ in the circulation in the context of their holders is displayed in the rice. Since the beginning of a large war in this structure, the share of legal (by 3 p. ) and individuals (by 1.8 p. The share of non -residents was most reduced (by 6.7 p. ) and to a small extent - the share of banks.
In the absolute dimension over the past three years, commercial banks of Ukraine increased their own OVVZ portfolio by UAH 342 billion, legal entities (without Ukrfinzhilla) - by 96 billion, and individuals - by 53 billion UAH.
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It is important to note that since the end of 2023, the NBU reign twice changed the rules for the formation of reserves for their liabilities for their liability, allowing them to cover them at the expense of the benchmark.. Such measures helped maintain the demand of banks to OVGZ, preventing their complete switching to the NBU departments.
As for the immediate prospects for the development of the OVGZ market, it should be primarily narrowed by the scope of the NBU deposit certificates and proceed to the use of exclusively government bonds as a means of regulating the financial market. This would solve the problems of the segmentation of the market of state securities, undesirable competition for the OVGZ, the lack of a single price landmark in the financial market. It is quite significant that the elimination of the competition of government and the NBU for attracting free funds would reduce the cost of servicing internal public debt.
That is, the establishment of a full and balanced market for the OVVZ requires the abolition of urgent deposit certificates of the NBU and a significant reduction in “remuneration” to banks for the maintenance of their own liquidity in the Central Bank. Along with this, the achievement of the moderate value of internal loans should be based on a suspended interest policy by the National Bank and reducing interest rates on new issues of OVGZ to a level approaching the predicted inflation rate for the coming year.
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In order to avoid unreasonable overestimation of the value of state loans in conditions of unstable inflation, it would be advisable to expand the OVS line due to the yielding to the rate of inflation (inflation-lineked bonds). Now only the NBU has such bonds in its portfolio.
The experience of countries with emerging markets convinces us that the introduction of such tools helps to expand the market and extend the terms of borrowing. Along with this, the release of government bonds with reference to the pace of inflation would also reduce the cost of state borrowings, since the currently fixed interest rates on the OVVs include high inflation premiums.
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