# Ukraine's External State Debt Has Risen 25-Fold in 15 Years as Pakistan's Senate Pushes Back on IMF Conditions

Kyiv owed the equivalent of $167.8 billion abroad at the end of July, while Islamabad has been told to phase out its tax-free industrial zones by 2035.

- Published: 2026-09-02T05:13:06.621Z
- Canonical: https://polylog.news/2026-09-02/ukraine-s-external-state-debt-has-risen-25-fold-in-15-years
- Publisher: Polylog (Global desk)
- Section: macro
- Sources: [RIA Novosti](https://ria.ru/20260902/gosdolg-2114794792.html), [Dawn](https://www.dawn.com/news/2026750/govt-told-to-renegotiate-imf-terms)

Two countries at opposite ends of Eurasia illustrated the same condition on Tuesday: an economy whose fiscal choices are now made jointly with its official creditors.

[RIA Novosti reported](https://ria.ru/20260902/gosdolg-2114794792.html), citing Ukrainian finance ministry data, that Ukraine's external state debt has increased 25 times over 15 years, rising from 299.4 billion hryvnia in 2011 to 7,497.5 billion hryvnia, about $167.76 billion, as of 31 July 2026. The figure comes from a Russian state outlet and should be read with that in mind, but it is consistent with independent tallies. Ukrainian and regional financial media have put [total state and state-guaranteed debt at about $214 billion, above 105 percent of gross domestic product](https://eadaily.com/ru/news/2026/08/25/gosudarstvennyy-dolg-ukrainy-dostig-212-4-mlrd-dollarov-prevysiv-105-vvp). Most of the increase reflects official lending from Western governments and institutions rather than market borrowing, which changes who sets the terms of any future restructuring.

In Pakistan, a subcommittee of the Senate Standing Committee on Finance and Revenue directed the government to renegotiate with the International Monetary Fund (IMF) to avoid closing the country's export processing zones and special economic zones, [Dawn reported](https://www.dawn.com/news/2026750/govt-told-to-renegotiate-imf-terms). The Ministry of Industries and Production told the committee that phasing out those zones nationwide by 2035 is part of the conditionality attached to Pakistan's Extended Fund Facility, intended to bring all sectors under a uniform tax regime. [Pakistani outlets reported](https://propakistani.pk/2026/09/02/senate-panel-tells-govt-to-halt-imf-backed-phaseout-of-economic-zones/) the same instruction from the panel.

The two cases share a mechanism. When a state cannot fund itself from domestic saving, the marginal lender acquires a say over tax policy, subsidy design and industrial strategy. In Kyiv that lender is a coalition of allied governments financing a war. In Islamabad it is a multilateral fund insisting that tax exemptions end. Neither arrangement is unusual, and both mean the same thing for investors: the sovereign's policy path is set partly outside the country.

## What this means

Debt owed to official creditors rather than to bondholders is harder to restructure and comes attached to policy conditions, so both countries face slower fiscal adjustment and less room to use tax incentives to attract investment. Pakistani manufacturers operating inside special economic zones lose their exemptions on the announced timetable, which raises their effective tax rate and changes the return on existing plant. Ukraine's creditors, principally Western governments, hold an exposure whose repayment depends on how the war ends rather than on any market metric.

## What to watch

- Whether Pakistan's government actually reopens the zone phase-out with the IMF, since a successful renegotiation would show conditionality is more flexible than the published programme suggests.
- The share of Ukraine's financing that comes as grants rather than loans in the next European Union and Group of Seven packages, because that ratio determines how large the postwar debt stock becomes.
- Any move to restructure Ukraine's official debt, which would set a template other war-affected borrowers can point to.