№ 9/2015

Fìnansi Ukr. 2015 (9): 61–77

PUBLIC FINANCE MANAGEMENT

BOHDAN Ivan ¹

¹National Bank of Ukraine
OrcID ID : https://orcid.org/0000-0002-1752-0198

Fiscal sustainability in Ukraine and assessment of the fiscal gaps up to 2020

The article is devoted to the practical aspects of application of the modern tools for assessment of fiscal sustainability in Ukraine. The article presents the evolution of approaches to the definition of “fiscal sustainability” and the role of indicators of fiscal gap S1 and S2 for its identification and measurement. The essence of the components of the fiscal gap is explained, which are associated with the current level of public debt and the structural fiscal balance, macroeconomic factors, population aging and targeted parameters of the programs of fiscal consolidation. The author proposes the modified methodology for assessment of the fiscal gaps in Ukraine which takes into account the effects of devaluation of the national currency. He also suggests application of an analytical index “debt service burden index”, which synthetically combines the effects of real GDP growth rates, national currency exchange rate depreciation (appreciation) and the dynamics of the average interest rate on debt. On a basis of the IMF’s medium-term forecast of public finance, the author elaborates his own forecast of the fiscal gaps in Ukraine, consisting of two scenarios: first one encompasses the period of 2015-2020, and the second one — the period of 2016-2020. It is found that indicators of the fiscal gaps in Ukraine amount 3,7 and 5,4 % of GDP, depending on the forecast scenario. These results show a high degree of instability of national public finance in the medium- and long run. Based on given particularities of public finance in Ukraine, the author argues the necessity to run a large-scale fiscal consolidation and to overcome the systemic problems of the public sector. Restoration of the long-term fiscal sustainability should become a priority of the fiscal policy in Ukraine and fiscal gap indicators should be one of the tools helpful for design, implementation and adjustment of the strategy of fiscal reforms.

Keywords: public finance, fiscal sustainability, fiscal gap, forecast.

JEL: H12, H60, H63.

BOHDAN I. . Fiscal sustainability in Ukraine and assessment of the fiscal gaps up to 2020 / I. . BOHDAN // Фінанси України. - 2015. - № 9. - C. 61-77.

Article original in Ukrainian (pp. 61 - 77)

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