№ 1/2020

Fìnansi Ukr. 2020 (1): 73–82https://doi.org/10.33763/finukr2020.01.073

BUDGET POLICY

VOZNYAK Halyna ¹, ZHEREBYLO Iryna ²

¹SІ “Institute of Regional Research named after M. I. Dolishniy of the NAS of Ukraine”
OrcID ID : https://orcid.org/0000-0003-2001-0516
²SHEE “Banking University”
OrcID ID : https://orcid.org/0000-0002-3147-9590

The formation of financially solvent territorial communities: risks of decentralization

Financial decentralization is a powerful mechanism for increasing the efficiency of budgetary use and creating the right financial conditions to ensure that local and local governments fulfill their powers. In parallel, it may produce risks for the formation of financially viable newly established territorial communities. The purpose of the article is to identify and systematize the risks of financial decentralization in order to form financially viable territorial communities and justify possible ways of leveling them. The article identifies the potential risks of deepening this reform and describes their characteristics. It is shown that among them are domination of local interests over national ones; minimizing the effectiveness of central government control over the local budget process; the effect of “soft budget constraints” and an over-orientation on current consumption; ignoring the criteria of forming capable communities and politicizing the process of community association with oblast councils; duplication of powers and deepening imbalances in the format of "resource-powers"; deepening financial and economic differentiation in the levels of territorial development, etc. It is proved that in the process of forming financially viable territorial communities there may be interrelated risks of different nature, and therefore it is appropriate to consider them in complex. This will allow them to anticipate their consequences and take steps to eliminate them. Possible directions of their leveling in terms of improvement of regulatory legal support are suggested; strengthening the control over the activity of local self-government bodies; increasing transparency of the budget process, etc.

Keywords:financial decentralization, territorial communities, financial capacity, risks, local budgets

JEL: С23, Н77, R58

VOZNYAK H. . The formation of financially solvent territorial communities: risks of decentralization / H. . VOZNYAK, I. ZHEREBYLO // Фінанси України. - 2020. - № 1. - C. 73-82.

Article original in Ukrainian (pp. 73 - 82)

Download

Downloads :267

1. Lunina, I.O. (2014). Budget decentralization: goals and directions of reform. Economy of Ukraine, 11 (36), 61–75 [in Ukrainian].
2. Malynyak, B. S. (2019). Shortcomings of local governments in budgeting for unified territorial communities and their possible solutions. Finance of Ukraine, 5, 79–96 [in Ukrainian].
doi.org/10.33763/finukr2019.05.079
3. Spasiv, N. Ya. (2019). Assessment of structural disabilities in the income of budgets of the united territorial communities. World of finance, 2 (59), 73–84 [in Ukrainian].
doi.org/10.35774/sf2019.02.073
4. Oparin, V. M. (2015). Dominants and priorities of financial equalization in Ukraine. Finance of Ukraine, 6, 29–43 [in Ukrainian].
5. Cantarero, D., Perez Gonzalez, P. (2009). Fiscal decentralization and economic growth: Evidence from Spanish regions. Public Budgeting & Finance, 29 (4), 24–44.
doi.org/10.1111/j.1540-5850.2009.00941.x
6. Boex, J., & Edwards, B. (2016). The (Mis-) Measurement of Fiscal Decentralization
in Developing and Transition Countries: Accounting for Devolved and Nondevolved
Local Public Sector Spending. Public Finance Review, 44 (6), 788–810. DOI: 10.1177/
1091142115616183.
7. Kim, J., & S. Dougherty (Eds.) (2019), Fiscal Decentralisation and Inclusive Growth in Asia, OECD Fiscal Federalism Studies. Paris: OECD Publishing.
doi.org/10.1787/25cf7545-en
8. Prudhomme, R. (1995). The Dangers of Decentralization. The World Bank Research Observer, 10 (2), 201–220.
doi.org/10.1093/wbro/10.2.201
9. Weingast, B., Shepsle, K., Johnsen, C. (1981) The political economy of costs and
benefits: a neoclassical approach to distributive politics. Journal of Political Economy, 89 (4), 642–664.
doi.org/10.1086/260997
10. Sagan, M. (n. d.). The experience of decentralization of power in Poland and its implications for regional development. Retrieved from: msps.su/files/2011/11/Opyt-decentralizacii-wlastii-w-Polshe_MSagan.pdf [in Russian].