№ 6/2017

Fìnansi Ukr. 2017 (6): 26–37

BUDGET POLICY

BASHKO Vasyl ¹

¹State Educational and Research Organization “Academy of Financial Management”

Fiscal sustainability and budget rules in Ukraine

Over the past few years, Ukraine has experienced a high rate of increase in the debt burden, which has led to a significant increase in debt risks. In order to analyze the compliance of current fiscal policy with the state of the national economy and the level of debt burden, the article examines the factors of strengthening the latter in Ukraine and the measures necessary to reduce it in the future. With the help of the Hodrick-Prescott filter, the potential volume of gross domestic product is determined, and on its basis – the GDP-gap and the cyclical component of the budget balance. There are arguments in favor of the assertion that the traditional indicator of the budget deficit is not an adequate indicator of the direction of fiscal policy. An assessment of the current fiscal policy by such a criterion as the primary structural balance of the general government sector is given. Using the methodology of the European Commission, S1 fiscal sustainability indicator, characterizing the adequacy of fiscal consolidation measures taken to reduce the debt burden to a safe level, is defined. The calculation of this indicator takes into account the structural impact of population aging on the budget balance. The main obstacles to reducing the debt burden are clarified. It is proposed to amend the Budget Code of Ukraine to tighten fiscal discipline by introducing budget rules that would facilitate the implementation of a balanced fiscal policy and minimize the influence of political factors on fiscal policy, namely: to limit the level of debt financing of the state budget, the amount of state guarantees, state loans in foreign currency; to increase transparency and predictability of fiscal policy.

Keywords:budget rules, fiscal sustainability, debt burden, the primary structural and cyclical balance, population aging.

JEL: Н61, Н62, Н63.

BASHKO V. . Fiscal sustainability and budget rules in Ukraine / V. BASHKO // Фінанси України. - 2017. - № 6. - C. 26-37.

Article original in Ukrainian (pp. 26 - 37)

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