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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
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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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Determination of the stage of involvement of Ukraine into a debt trap
that caused relevance, corresponding scientific interest and the purpose of this work.
The purpose of the present article is to disclose the content of the concept “debt trap” and development of criteria of the stage of involvement into it of public finance of Ukraine.
The global financial crisis that began in 2008 brought the national financial markets of developing countries into recession. Appearance of crisis phenomena in the financial system of Ukraine has begun since August 2009: sharp falling of a rate of the Ukrainian hryvnia to the main world currencies, shortage of liquidity in the banking system, and also reduction of payments on the issued currency credits. Attempts to support the banking system by providing refinancing created the channel of transmission of the crisis phenomena in public finance that was expressed in increase in deficiency of the state budget and public debt, and also caused violations in financial architectonics. The fiscal repressions of the Government of Ukraine directed at the reduction of budget deficit and stabilization of the exchange rate led to increase in social tension, strengthening of financial inequality and disproportions in regional development. The listed above factors became the reason of social collisions, and the armed conflict and loss of territorial integrity of Ukraine led to conditions of singularity of course of the crisis. Public finance of Ukraine enters bifurcation space with high degree of uncertainty and risks. Growth of the main macroeconomic indicators of the gross domestic product (GDP), the gross national product (GNP), the national wealth (NW) and the balance of payments is negative, in accordance public finance of Ukraine is in condition of financial singularity, financial architectonics is deformed. Tax revenues decrease, volumes of financial requirements for social protection of the population increase, in the conditions of annexation of part of the territory defence expenditure, support of army and other power structures increase. In more detail the features of course of the crisis in Ukraine were considered in an article by A. Hrytcenko [7].
In such conditions, budget deficit and volume of loans both in internal and in international market increase, that leads to increase in public debt. The ratio between the public debt and GDP passes the edge
level established by the Budgetary Code of Ukraine at the level of 60%, that as of 01.01.2015 makes 77,6% [8].
Here appears a phenomenon of a “debt trap” — a certain condition ofpublic finance at which the ratio of the expenses ofthe state budget on public debt management to the amount of new loans of the state tend to one. The public finance ofthe country is so disbalanced that it can’t without attraction of new loans carry out management of the present public debt.
In such conditions, budget deficit and the amount of loans both in internal and in the international market increases that causes that Ukraine promptly moves to a debt trap: the ratio of the expenses on public debt management per year to the amount of the loans attracted in a year increases from 0,165 in 2008 to 0,368 in 2014, for the studied period occurred more than double increase [9; 10].
Author’s definition of a debt trap allows carrying out classification of stage of involvement of public finance into a debt trap depending on value of the ratio. We will define the limits of range for values of ratios and we will offer an explanation to the allocated ranges.
0-0,25 — acceptable level. Costs of public debt management don’t exceed a quarter of the amount of new loans. Involving into a debt trap is hardly probable.
0,26-0,5 — acceptable critical level. Up to a half of the amount of the attracted resources is used for management of already accrued public debt. Formation of a debt trap is rather probable.
0,51-0,75 — critical level. The most part of increase of the state loans goes for management of debts for last years. The probability of getting into a debt trap is high.
0,76-1 — inadmissible level. Almost the whole amount of the attracted financial resources goes for management of already present loans. The debt trap is inevitable.
More than 1 — Debt trap — all the amount of attracted resources is not enough for national debt management. Depth of immersion into it directly depends on the amount of excess of the actual value of unit.
The offered ranging allows giving a profound assessment of the ratio of costs on public debt manage-
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Section 3. Finance, money circulation and credit
ment to its volumes. Value of the indicator is positively related to the size of the average weighted interest on the attracted resources. With attraction of more expensive resources value of the ratio increases.
Other factor, that in direct proportion influences the ratio, is the amount of payments on public debt management. The state loan portfolio can be formed from rather inexpensive resources, but because of the large volume of public debt the sum of payments can be considerable.
The factor influencing in inverse proportion the value of the studied ratio is the amount of the new state loans attracted in the current period. Value of this indicator is a monetized expression of confidence in the country as in the borrower in the international and internal financial markets. At increase of confidence it is rather easy for government of the country to attract financial resources in the financial market, and in the conditions of decrease in confidence investors prefer less risky investments. The trust of potential investors substantially is defined by information provided by reputed world rating agencies, such as Fitch Ratings, Moody’s, Standard & Poor’s (S&P) and some others.
Public debt management demands development of the corresponding strategy, analysis of the ratio of expenses on public debt management to the size of the attracted resources has to become one of integral elements of such strategy. At identification of increase in the ratio it is necessary to develop and undertake a package of the governmental measures directed on depreciation of public debt management; decrease in its amount and return of confidence of potential investors, elimination of deformations of financial architectonics.
Dynamics of the ratio of public debt management to the volume of the current attraction of financial resources in Ukraine increased from 0,165 to 0,368 from 2008 till 2014. There was a quality change of the studied indicator from acceptable level and insignificant probability of getting into a debt trap to acceptable critical level, at which getting into a debt trap rather probable.
For the analysed time period the probability of getting into a debt trap significantly increased, risks of investment in the Ukrainian paper holdings grew, and credit ratings are lowered to “RD” value — restricted default [11].
Conclusions. In the article a new scientific approach to the solution of applied research task connected with development of means and methods of public debt management is offered.
Author’s definition of the concept “debt trap” as a ratio of annual expenses on public debt management to the amount of the new state loans attracted in the current year is offered.
Criteria of identification of the stage of involvement of public finance of the country into a debt trap are developed.
It is established that the stage of involvement of public finance of Ukraine into a debt trap since 2008 raised more than twice and by the end of 2014 reached the acceptable critical level, at which getting into a debt trap is rather possible.
The revealed tendency has to stimulate development of the state strategy of effective public debt management directed on decrease in the degree of risk of getting into a debt trap and elimination of deformations of financial architectonics.
References:
1. Barro, Robert J., “On the Determination of Public Debt,” Journal of Political Economy, 1979 - Vol. 87, No. 5. P. 940-971.
2. Barro Robert J., Sala-i-Martin Xavier X., Public Finance in Models of Economic Growth Review of Economic Studies,1992 - v59 n4 October 1992. P. 645-61.
3. Reinhart, Carmen M., and Kenneth S. Rogoff “From Financial Crash to Debt Crisis,” American Economic Review, 2011 - Vol. 101, No. 5, August. P. 1676-1706.
4. External Debt Statistics: Guide for Compilers and Users [Washington, D. C.]: International Monetary Fund, 2003. - 309 p.
5. Khmelkov A. V. Institucional’naja infrastruktura obespechenija stabil’nosti publichnyh finansov: k postanovke problemy/A. V. Khmelkov//Vestnik Khar’kovskogo nacional’nogo universiteta im-
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Mandate of macroprudential policy: recommedation for Ukraine
eni V. N. Karazina (Serija: Jekonomicheskaja)- H.: HNU imeni V. N. Karazina, 2014 - № 1118 - Vyp. 88 - S. 84-90.
6. Glushchenko O. V. Methodological aspects of the research of the public finance of Ukraine: resistance, flexibility and fragility/O. V. Glushchenko//Institutional framework for the functioning of the economy in the context of transformation: Collection of scientific articles. - Publishing house «BREEZE», Montreal, Canada, 2015. - 344 p. P. 167-173.
7. Hrytcenko A. Systemna kryza jak naslidok bazovoi’ destrukcii’ ekonomiky Ukrai’ny i shljahy i’i’ podolannja/A. Hrytcenko//Visnyk Nacional’nogo banku Ukrai’ny - 2014. - № 5. - S. 8-12.
8. Cina derzhavy [Elektronnyj resurs]. - Rezhym dostupu: http://cost.ua/ - Zagolovok z ekranu: http://cost.ua/budget/debt
9. Derzhavnyj ta garantovanyj derzhavoju borg Ukrai’ny za stanom na 31.12.2014 Oficijnyj ministerstva finansiv Ukrai’ny [Elektronnyj resurs]. - Rezhym dostupu: http://www.minfin.gov.ua - Zagolovok z ekranu: http://www.minfin.gov.ua/file/link/410420/file/Debt_31.12.2014.pdf
10. Bjudzhetnyj monitoryng: Analiz vykonannja bjudzhetu za 2014 rik Oficijnyj sajt Instytutu bjudzhetu ta social’no-ekonomichnyh doslidzhen [Elektronnyj resurs]. - http://shshsh.ibser.org.ua/Rezhym dostupu: http://shshsh.ibser.org.ua/neshs/558
11. The official website of the rating Agency Fitch [Elektronnyj resurs]. - Rezhym dostupu: htt-ps://www.fitchratings.com - Zagolovok z ekranu: https://www.fitchratings.com/site/fitch-home /pressrelease?id=991865
Nikonova Maryna Vyacheslavivna, Senior economist of macroprudential policy division, Financial Stability Department, National Bank of Ukraine, PhD E-mail: [email protected]
Mandate of macroprudential policy: recommedation for Ukraine
Abstract: At the present stage of financial system development, the process of reforming the system of regulation and supervision are currently being continued. The main purpose of this reforming is creating the conditions for adequate assessment of systemic risks and implementation of macroprudential policy. A well-defined policy framework is a necessary condition for effective macroprudential policy. In the article, the current level institutional arrangements in Ukraine is assessment. The basic principles to assign the macroprudential mandate in Ukraine are grounded.
Keywords: macroprudential policy, mandate of macroprudential policy, macroprudential institutional arrangements, model for macroprudential policymaking.
The lack of adequate attention to the risks of the financial system as a whole, incapable of counteract such risks and lack of a clear division of responsibilities, respectively, of responsibility between authorities were among the main causes of the global financial crisis. Understanding of this fact led to the implementation of post-crises reform of financial sector regulation and supervision in most countries. The key role of regulation and supervi-
sion should be limited to prevent crises and mitigate their impact.
Today at the international and national levels, the activities to create foundations to ensure the stability of the financial system as a whole. As a part of this activity is the establishment of completely new policy areas — macroprudential policy, which aims to identify, analyze and counter risks to the financial system as a whole, as opposed to traditional micro-
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