Abstract for: Why does Ukraine’s sovereign debt keep rising? Path dependent dynamics under external official financing

Ukraine's sovereign debt has reached unprecedented levels during the war despite rising sovereign risk and worsening debt indicators. Conventional debt sustainability frameworks suggest that increasing risk should constrain borrowing through market - discipline mechanisms. However, continued external official financing may weaken this relationship by sustaining financing availability. This study examines how externally supported financing alters debt dynamics and contributes to persistent debt accumulation over time. This study applies a system dynamics approach to examine how external official financing influences sovereign debt dynamics under wartime conditions. A feedback-based model is developed to analyze the interaction between debt accumulation, financing availability, sovereign risk, and debt-adjustment mechanisms. Particular attention is given to financing-buffer effects, path dependence, and the feedback structures that sustain long-term debt growth. The analysis identifies a financing - buffer mechanism through which accumulated official financing commitments sustain financing availability despite rising sovereign risk. The model suggests the emergence of partial decoupling between sovereign risk and financing access, allowing debt accumulation to persist. The results further indicate the possibility of debt - financing lock - in, where continued external support reinforces long - term dependence on future financing. The findings suggest that wartime sovereign debt dynamics are shaped by the interaction of debt accumulation, financing support, and debt-adjustment mechanisms. While external official financing provides short - term fiscal stability, it may also increase long - term dependence on future support. The model offers a framework for evaluating debt sustainability policies and alternative financing strategies under conditions of prolonged uncertainty. AI tools were used to assist with text editing and structuring of the abstract