Stairs to Basement

I'd like to replace my basement stairs soon. Currently they are in poor shape and the treads are only around 7.5". The rough opening is quite narrow and one side is up against the concrete foundation. Eventually I plan to finish the basement walls with XPS insulation, stud walls and Roxul insulation. However, the stairwell area needs the least amount built off the foundation.

Aside from just painting the concrete, what is the best way to drywall the stairwell up against the foundation while avoiding any potential moisture issues?

Thanks!