Russia conducted another large-scale drone and missile attack on Kyiv overnight, again targeting energy and industrial infrastructure. The attack involved 242 drones, 22 cruise missiles, and 13 ballistic missiles, of which the Ukrainian Air Force reported intercepting 226 drones, 10 cruise missiles, and eight ballistic missiles. In a separate strike, Russia reportedly used an Oreshnik intermediate-range ballistic missile to hit an undisclosed infrastructure or industrial facility in Lviv. According to reports, the Kyiv strikes damaged energy infrastructure and triggered emergency power rationing in several municipal districts on the left (eastern) bank of the Dnipro River. Over the previous two days, Russia also intensively attacked energy infrastructure in the Dnipropetrovsk and Zaporizhya regions in the east, causing partial blackouts. Power supplies were reportedly cut to more than one million households as well as numerous commercial and industrial consumers, disrupting electricity, water and heating services, and rail transportation. Power supply was partly restored in Zaporizhya yesterday, while repairs in Dnipropetrovsk remained ongoing, complicated by continuing drone attacks.

Ukraine’s direct and guaranteed public debt totaled $204bn as of end-November, up 3.6% m-o-m and 23% YTD.

NBU gross foreign reserves rose by 4.6% m-o-m or $2.5bn in December, following increases of 11% and 6.4% in November and October, reaching a new all-time high of $57.3bn (+31% y-o-y), equivalent to 5.9 months of prospective goods and services imports. The official hryvnia exchange rate against the US dollar weakened by 0.5% m-o-m in December to UAH 42.4:USD, but was still 0.8% stronger y-o-y. The hryvnia depreciated by 2.0% m-o-m against the euro, to UAH 49.9:EUR, bringing the y-o-y decline to 12%.

According to provisional data from the Finance Ministry, the central budget’s cash-based deficit widened to UAH 392bn ($9.3bn) in December from UAH 139bn ($4.1bn) in November, bringing the full-year gap to UAH 1,630bn or $39bn, up from $34bn in 2024.

Baseload day-ahead (DAHD) electricity prices in Ukraine averaged UAH 6,649 (EUR 135)/MWh in December, up 4.1% m-o-m and 15% y-o-y. The 2025 average stood at UAH 5,292 (EUR 112)/MWh, up 17% y-o-y.

The National Bank’s survey-based index of business activity, a PMI-type gauge, stood at 49.2 on a 0-100 scale in December, down 0.3pt m-o-m but up 3.3pt y-o-y.

US President Donald Trump’s envoy Steve Witkoff reported positive meetings in Paris yesterday with the Ukrainian leadership and the Coalition of the Willing, mostly comprising Ukraine’s European allies, to advance work on security guarantees and a post-war economic recovery plan for Ukraine. Witkoff said talks on the security commitments were “largely finished” and the US agreed with the Coalition that “durable security guarantees and robust prosperity commitments are essential to a lasting peace in Ukraine.” He added that talks with the Ukrainian delegation will continue today.

The Ukrainian Finance Ministry placed UAH 430bn ($10bn) of hryvnia-denominated bonds and $3.3bn of FX-denominated paper in gross terms at primary auctions in 2025. With UAH 334bn ($8.0bn) of UAH bonds and $3.7bn of FX bonds redeemed, full-year net proceeds amounted to $1.9bn, down from $5.9bn in 2024, $5.5bn in 2023, and $6.0bn targeted by the 2025 budget law.

According to a Nov. 26-Dec. 29 survey by the Kyiv International Institute of Sociology (KIIS), the share of respondents agreeing that Ukraine could accept a loss of territory to facilitate a peace deal with Russia shrank to 33% toward end-2025 from 38-39% earlier in the year. Any surrender of territory was unacceptable to 53%, little-changed from earlier in 2025.

Ukraine’s State Statistical Service (SSS) reported that the decline in industrial production (IP) widened to -6.3% y-o-y in November from -4.6% in October, bringing the YTD contraction to -2.4% y-o-y after -2.2% in 10M25. Meanwhile, construction activity rebounded to +6.7% y-o-y in November following -10% in October, keeping the YTD increase at +12%. Retail turnover growth accelerated to 14% y-o-y from 10% in October, lifting the YTD tally to +7.2% after +6.5% in 10M25. Finally, agricultural production surged by 82% y-o-y in November after -4.6% in October, narrowing the YTD decline to -6.6% from -12% in 10M25.

Ukraine’s headline current account (CA) deficit widened to $3.5bn in November from $2.1bn in October, bringing the 11M25 gap to $31bn vs. $15bn in 11M24. The financial and capital account (FA) surplus, including IMF funds, increased to $8.5bn from $5.1bn in October and $3.4bn in September, lifting the 11M25 surplus to $40bn from $14bn a year earlier. As a result, the overall balance of payments surplus rose to $5.1bn from $3.0bn in October and reached $9.3bn in 11M25, reversing from -$1.1bn in 11M24.

Key highlights: ·   Russian forces made new tactical advances throughout the front during the holiday period, focusing on Donetsk and Zaporizhya regions. Ukrainian forces solidified gains in Kharkiv region. ·   The Russian army captured 4,500 km2 or 0.7% of Ukraine’s territory in 2025 — less than the remaining Ukrainian-controlled area in Donetsk region which Russia demands surrendered. ·   Russia intensified attacks on Ukrainian sea and river ports in Odesa region in late December, damaging Kernel Holding’s facility.

National security advisers from over a dozen European countries and Canada visited Kyiv on Saturday to hold talks with President Volodymyr Zelensky and top government officials, including from the economic sector, as part of ongoing talks involving the US on developing security guarantees for Ukraine and a broader peace framework.

The Ukrainian Finance Ministry reported gross foreign budget support of $52.4bn in 2025, up from $42bn in each of 2023-24 and $32bn in 2022. Separately, Defense Minister Denys Shmygal said Ukraine secured $45bn of military aid last year, almost 30% higher than in 2024, including $10bn from the US and $35bn from the EU, Canada, Australia, and other donors.

President Volodymyr Zelensky announced a large-scale reshuffle across the government, security services and his office over the weekend, pledging to overhaul the entire defense, security and law enforcement leadership except the commander-in-chief of the armed forces.

Fitch upgraded its Long-Term Foreign Currency (LTFC) rating on Ukraine to CCC from RD following the completion of the restructuring of $2.6bn of GDP warrants, which normalized relations with the substantial majority of Ukraine’s external commercial creditors. Including the sovereign Eurobond restructuring completed in August 2024, Fitch estimates that Ukraine has restructured 94% of its commercial public debt. Fitch assigned a CCC+ rating to the $3.5bn of new sovereign Eurobonds issued in exchange for GDP warrants (C-bonds) and affirmed the ratings on the A- and B-series bonds at CCC, with the one-notch uplift for the C-bonds reflecting their enhanced credit and voting protections. Fitch said it could downgrade Ukraine’s rating if lower international financial support or further intensification of the war increases the probability of another debt restructuring or default. Conversely, a sustained reduction in security risks could lead to further upgrades.