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Budget transparency: the problems of defining
Section 3. Finance, money circulation and credit
Vynnychenko Nataliia Vladimirovna, Ph. D., Associate Professor, Ukrainian Academy of Banking E-mail: [email protected]
Budget transparency: the problems of defining
Abstract: In the article deales the modern approaches to defining the essence “transparency”. Investigate its role in the the budget management and determined the nature of budget transparency.
Keywords: transparency, budget transparency, public information, transparency characteristic, budget process, public, openness, publicity.
Unfinished transformation processes in Ukraine’s economy, the lack of a coherent and balanced state financial policy have led to a protracted socio-economic crisis and macroeconomic imbalances in the country. One of the important factors that led to the problems above is ineffective economic policy and a high level of corrupt practices among public authorities. So, today the rapid decline of the national currency, the lack of reforms in the energy sector, the massive bankruptcy of Ukrainian banks and the chronic deficit of the Pension Fund of Ukraine led to an additional burden on the state budget, which had the following consequences for the country in 2015: the amount of the consolidated budget deficit and public debt compared to 2005 increased by 11 and 19 times respectively. So today it is extremely urgent for Ukraine to search for new methods and tools for budget management to solve the problems mentioned above.
The experience of developed countries shows that macroeconomic stability, efficient allocation of budgetary resources between consumption and investment and improving the welfare of people are possible by introducing effective control over filling the budget and targeted use of its funds and involvement the public into all the stages of the budget process, that is, putting into practice the principles of budget transparency.
The concept of “transparency” is new in the works of domestic scientists, but is spreading rapidly in academic and journalistic articles, recommen-
dations and strategies for the development of various spheres of public life. Etymologically, the term of “transparency” comes from the English language and means characteristic of an object or phenomenon to be accessible and easy to understand.
According to experts of the international public organization to combat corruption and study of corruption (Transparency International), transparency — is the main characteristic of governments, companies and citizens, which provides information disclosure of rules, plans, processes and actions during their operation.
In the general sense transparency is traditionally considered at the entity level of the real and financial sectors, branches and spheres of the financial system or the state in general, that is this term has certain levels of use (macro and micro).
Generalization of theoretical views concerning the interpretation of transparency at the micro level allows to state that the majority of scientific papers have no signs of consistency. Thus, by the foreign scientists [1] transparency is interpreted as the accessibility and comprehensibility level of information to potential investors and other market participants. N. Zachosova and D. Kutsenko [2] noted that transparency is a characteristic of openness of a company, achieved by disclosing information about the organizational structure, risk management peculiarities and results of its activities. However, these approaches, in our opinion, mostly characterize transparency of public information
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Section 3. Finance, money circulation and credit
disclosure about the structure of the company and its financial position. Some authors [3] suggest transparency to be defined more specifically at the micro level, namely as an act of sharing confidential information and tacit knowledge in the exercise of a certain kind of financial and economic operations. In our opinion, this definition focuses on the transfer of inside information that is not a transparency characteristic. In the context of the purchase and sale of securities between participants of the stock market transparency is defined as the offer of an objective, complete and accurate information
[4]. In our view, transparency not only provides getting reliable information by market participants but also an open decision-making process.
Within the macro level it is advisable to give a generalized definition of transparency by M. Hve-syk, A. Sunduk and O. Dobrianskyi [5], who view it as a factor in the impact of the global space on internal processes in the country, namely the set of phenomena and processes creating conditions for the formation of a positive image of the country to foreign states and international organizations.
The american scientist S. Kim [6] considers transparency as an open system of governance based on clearly defined processes and procedures, which creates free access to public information for citizens. Similar view belongs to the national researcher N. Gryshchenko [7], who says that only the access to public information reveals the essence of the concept of “transparency”. In our opinion, this interpretation is somewhat debatable as it reflects the content of transparency fragmentary, not including all the components of this concept.
Scientists Vishvanath and Kaufmann, exploring the concept of transparency in work [8; 9] define it as increasing the flow of timely and reliable economic, social and political information that is available to all interested parties. This interpretation emphasizes not only the openness of information but its reliability and availability to a range of potential agents. Among domestic researchers the idea of M. Rash-kovska is noteworthy [10], she proposes to consider this concept through the system of components that determine the required level of understanding and awareness on various aspects of government activities and ensure the rights and access to information,
public participation in the discussion and adoption of key government programs as well as control over the activities of officials. The specificity of this definition lies in focusing of the author on openness and transparency of activities of the state executive and legislative authorities only.
It must be noted that many aspects of the concept “transparency” are explained by the variety of objects for which it is used. In this study we consider “fiscal transparency” in more details as one of the most important factors of a positive image of the country in the international arena from the view point of information and procedural transparency in governmental formation and use of centralized funds.
Today modern methods of budget management at the state and local levels in many countries do not meet the requirements of transparency, that is when the executive power dominates the budget process, legislative power is limited to actions within budget debates or during the amendment to the draft budget; when there is a limited access to the information base on the state budget; or when public opinion in the budget process is minimal. So, budget transparency receives considerable attention in the implementation of budget reforms.
Despite the importance of budget transparency in the formation of a democratic society and stimulation of social and economic development this subject is widely covered mainly in the works of foreign scientists. Thus, G. Kopitts and D. Craig [11] consider budgetary transparency as openness of government to the public, providing access to accurate, complete, timely, understandable and internationally comparable information about its activities, so that market participants and voters were able to make the most accurate assessment of the financial condition of the country and the real costs and benefits of the governmental measures implemented it in the budget sector.
Lassen and Skilling [12] argue that the budget transparency is characterized by informativeness, comprehensiveness and reliability of fiscal accountability. This definition focuses on the publication of reports on budget implementation, that means that multifunctionality of transparency principle in the budget process is not taken into account.
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Budget transparency: the problems of defining
We share the opinion ofM. Robinson [13], who examines budget transparency in two areas: transparency and availability of data sources and information used in making decisions about the formation of budget revenues and their distribution; transparency of the central and local governmental bodies in the budget process.
The US State Department in its reports defines fiscal transparency as essential to the effective management of public finances, which helps to strengthen the confidence of market participants and creates conditions for sustainable economic development [14].
Significant role in the study of the issue of budget transparency is played by the international institutions such as the following: Organisation for Economic Co-operation and Development (OECD), International Budget Partnership (IBP), Open Government Partnership (OGP), International Monetary Fund (IMF), World Bank (WB), Open Knowledge Foundation (OKF).
In particular, according to the Code of Fiscal Transparency developed by the International Monetary Fund, budget transparency is seen as a characteristic of the government, characterized by openness to the public information on the state budget in previous years, tactical and strategic objectives of fiscal policy, as well as the structure and functions of the government that define this policy and its results.
In the analytical report of the Organization for Economic Cooperation and Development budget
transparency is treated as timely, regular and full disclosure of all relevant financial information.
To improve the effectiveness of the budget process A. Krutova [15] offers to ensure its transparency and involve the public as subjects of control over the formation and use of budgetary resources.
A. Muhyna [16] substantiates that fiscal openness of the budget process opens up opportunities for the citizens of the state and members of internal and external markets to assess the financial condition of the state and its future prospects adequately.
The analysis of the literature on the study enables us to conclude that most authors do not distinguish and sometimes identify «budget transparency» with such concepts as «transparency», «open-ness», «publicity». In our view these concepts are not identical, but interrelated when considering transparency, being its attributive characteristics. Thus, the absence of at least one of these characteristics does not provide evidence to suggest the presence of efficient and effective government institutions in the budget sphere.
In summary, in this study we suggest considering budget transparency as a process of disclosure of an accurate and timely information to all interested parties on the formation and use of centralized funds, and the openness and transparency of government bodies and officials that have budgetary powers in making decisions in this area.
References:
1. Bushman R. What Determines Corporate Transparency?/R. Bushman, J. Piotroski, A. Smith//Journal ofAccounting Research. - 2004. - № 2: - Р. 207-252.
2. Zachosova N. V., Kutsenko D. M. Information transparency as a factor of influence on the management of economic security offinancial intermediaries - Access mode: http://eprints.kname.edu.ua/38595/1/60-62.pdf
3. Lamming R. Developing the Concept of Transparency for Use in Supply Relationships/R. Lamming, N. Caldwell, D. Harrison, W. Phillips//British Journal of Management. - 2004. - № 4. - Р. 291-302.
4. Granados N. The impact of IT on market information and transparency: a unified theoretical framework/N. Granados, A. Gupta, R. Kauffman//Journal of the Association for Information Systems. -2006. - № 7 (3).
5. Hvesyk M. A., Sunduk M. A., Dobriansky A. I. Sustainable development in conditions ofglobal challenges and threats//Environmental Economics and Environmental. - 2012. - P. 5-21.
6. Toward Participatory and Transparent Governance: Report on the Sixth Global Forum on Reinventing Government.’ Public Administration Review/P. Suk Kim, J. Halligan, N. Cho, C. H. Oh, A. M. Eikenberry. - 2005. - № 65 (6). - P. 646-654.
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Section 3. Finance, money circulation and credit
7. Grishchenko N. Transparency authorities: no patricians - no vassals//Veche. - 2008. - № 11. - Access: http://www.viche.info/journal/982
8. Kaufmann D. Voice or Public Sector Management? An Empirical Investigation of the Determinants of Public Sector Performance Based on a Survey of Public Officials in Bolivia - Access: http://papers.ssrn. com/sol3/papers.cfm?abstract_id=316865
9. Vishwanath T. Towards Transparency in Finance and Governance. Policy Research Working Paper- Access: http://info.worldbank.org/etools/docs/library/18291/tarawish.pdf
10. Pashkovska M. The concept of transparency in modern science “governance”//The efficiency of public administration. - 2013. - № 34. - P. 135-143.
11. Kopits G. Transparency in Government Operations//International monetary Fund. - Access mode: https://www.imf.org/external/pubs/ft/op/158/op158.pdf
12. Alt J. E., Lassen D. D., Skilling D. Fiscal transparency, gubernatorial approval, and the scale of government: evidence from the States - Access: http://www.nyu.edu/gsas/dept/politics/seminars/Alt.pdf
13. Robinson M. Budget analysis and policy advocacy: The role of non-governmental public action/M. Rob-inson//IDS Working Paper. - 2006. - P. 145-162.
14. Fiscal Transparency Report/US Department of State. - 2014. - Access: http://www.state.gov/e /eb/ifd/oma/235938.htm
15. Krutov A. The electronic document management in public authorities Ukraine: realities and prospects of development today//Finance of Ukraine. - 2012. - № 12. - P. 112-124.
16. Muhyna A. Features of organization and management by budget processes in Russian Federation//The-ory and practice of socio development. -2013. - № 6. - P. 60-63.
Glushchenko Olga Viktorivna, V. N. Karazin Kharkiv National University PhD in Economics, Associate Professor Chair of Credit and Finance School of Economics Ukraine
E-mail: [email protected]
Determination of the stage of involvement of Ukraine into a debt trap
Abstract: The author’s understanding of the concept of a “debt trap” is offered. Criteria of assessment of the stage of involvement of public finance into a debt trap are allocated. It is established that the stage of involvement of public finance of Ukraine reached the critical level at which getting into a debt trap is rather possible.
Keywords: debt trap, national debt, public finance, financial architectonics.
Public finance is an essential part of economy and Rogoff K. S. [3]. The practical technique of an
of public sector. Research of the processes happening in public finance is capable to reveal their influence on the whole public sector of economic system.
The basis of modern understanding of the influence of public finance on economic growth was laid in works of Barro R. J. [1], and also Bar-ro R. J. Sala i Martin X. [2]. Problems of debt crisis are investigated in the work of Reinhart C. M.
assessment of an external public debt is stated by specialists of the International Monetary Fund in “Manual for authors and users’ ’ [4].
Among the Ukrainian authors the issue of public finance was revealed by Khmelkov A. [5], and also in work of the Author [6].
However, despite a significant amount of scientific development of the assessment system of general debt load on public finance it isn’t developed yet
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