“Comparative analysis of internal and external national debt of Ukraine taking into account the impact factors”

In this paper, scientific and methodological approaches as for interpreting the notion “national debt of the country” as a whole are systematized, the essence of “internal national debt” and “external national debt” in particular is clarified. Critical analysis of the state and dynamics of the national debt of Ukraine during 2006-2015 was performed. Dynamics of the extent of internal and external national debt of the country was studied and their comparative analysis was performed. Detailed structure of both internal part of the debt and its external part is presented. With the help of correlation analysis, strength of correlation and directions of influence of different types of debts on the national budget of Ukraine in 2006-2015 was determined.

The description of the main material of the research In modern conditions, significant attention of the scientists is devoted to the problem of national debt. Mainly, it is due to the need to support the financial capability of the state, authorities, economic actors, which are connected through the aggregate of financial and economic relationship. Theoretical aspects concerning the research on the essence of the notion "national debt" are being constantly studied by both national and world scientists (Vorobiov, Hrytsenko, 2009). In the economic literature on the issues of state finance, we can find absolutely different viewpoints concerning the interpretation of this notion.
According to the Budget Code of Ukraine, state budget is divided into internal (IND) and external (END).
Any state widely uses its own possibilities for attracting additional financial resources with the aim of timely financing of budgetary expenditures, which, as a result, leads to accumulation of both internal and external debt. i.e., there takes place growth of internal and external national debt, to which the greatest attention must be paid, as all other types of the state debt are, to some extent, derivative (Pavlovska, 2013).
Interrelationship and interdependence of END and IND are characterized by a total of loans performed by the state. It is necessary to add that the experience of Western countries proves that, every year, division of the national debt to the internal and Limited Liability Company "Consulting Publishing Company "Business Perspectives", 2017.
Viktoriia Obravyt, Ph.D. Student, Department of Finance, Banking and Insurance, Institute for Business Technologies "Ukrainian Academy of Banking", Sumy State University, Sumy, Ukraine. Viktoriia Koilo, Ph.D. Student, Department of Finance, Banking and Insurance, Institute for Business Technologies "Ukrainian Academy of Banking", Sumy State University, Sumy, Ukraine. external is of lesser importance. It goes with the stable convertibility of the national currency, and drawing together of basic conditions at the national debt markets with state and dynamics of world financial markets. Thus, the conditions of general approach to management of IND and END are provided, which also speeds up the process of promptly making necessary decisions (Vovk, Mazur, 2015). But different countries hold onto different approaches to regulation of the ratio between these debts. The Government, which has refused from external loans, becomes the biggest borrower at the internal financial market. It is considered that with this, the liquidity of government bonds increases and expenditures for debt servicing decrease. Let us note that the meaning of the interrelationship of END and IND for the economy of the country is that the capital inflow promotes the displacement of private investment due to increase of external debt, which pretty often leads to tax reform of stimulating type (Plets, 2011).
While analyzing the stock market in modern conditions, we can talk about lack of interest from its participants to the financial instruments of the state. In this case, there arises a need to solve the problem concerning the increase of trust from stock market actorsparticipants to the state and development of new types of government securities to satisfy the needs of different group of investors. Internal debt is a debt of country's Government to its citizens. It is a situation when everybody "owes to himself". When debt is not very big, it does not have significant negative impact on economy, as it is not accompanied by taking the material values abroad.
Internal national debt is a complex of accepted and institutionalized debt obligations (market and non-market) of state and regional public administration to economic actors, which are serviced by way of payment of interests or repayment of main debt sum. Internal national debt is a total of state's obligations to the residents, i.e., the state's debt to all citizens, which hold internal government bonds.

Plets, I.I. (2012)
Internal national debt is a sum of financial debt as a result of national credit and financial operations through the state, where the state is a borrower of idle funds of legal entities and natural persons with the aim of financing the countrywide needs and collective goods to carry out its functions and tasks with regard to improvement of the social and economic development.
Internal national debt is an internal debt of the state to enterprises and population, which emerged as a result of involvement of their funds for execution of state programs and state orders by way of putting government bonds and other government securities into circulation.

Pavlovska, E.O. (2013)
Internal national debt is considered as a "loan of nation to itself" and does not influence the overall amount of total wealth of the nation. Some negative consequences in the process of management are offset by the positive effects of the mobilization of additional financial resources into investment or development of country's economy. Internal national debt is connected with financing country's budget expenditures by the residents of the country in national currency and does not have such significant negative impact on country's economy, as, during the debt payment by internal loans, foreign capital transfers do not take place.

Eremeichuk, R.A. (2014)
Internal national debt is a total of state's obligations to the residents (state's debt to all the citizens, which hold internal government bonds). Internal national debt consists of debt, which arises annually according to new debt obligations of the Government. At the same time, problems connected with formation of the optimal definition of this category still remain unsolved in the economic area (Table 2). External debt is a sum of obligations of the country to external creditors on outstanding foreign loans and outstanding interests on them. External debt is a part of national debt, which is subject to payment in a currency other than hryvnia and is determined to a certain date as a difference in sum of external national loans (commitment) and sum of payments for repayment of external national debt as of certain date, including operations as of this date. Also, external debt is viewed as sum of country's financial obligations to foreign lenders.
(2010) External national debt is a debt to natural persons and legal entities abroad and foreign states.

Budget Code of Ukraine (2010)
External debt is a debt on loans obtained from international organizations for economic development, authorities of foreign states, foreign commercial banks, and suppliers.

Ospischeva, V.I. (2008)
External national debt is a country's debt to foreign citizens, states, banks and international financial organizations.

Govorushko, T.A. (2014).
External debt is a total of state authorities' obligations to international financial organizations, other countries and non-residents.

Plotnytskyi, M.I. (2003)
External national debt is a country's debt to states, natural persons and legal entities of other countries. External debt is a sum which the state has borrowed to cover the deficit of the balance of payment. External debt leads to loss of the part of domestic product and fall in country's prestige.

7.
Yurii, S.I., Fedosov, V.M. (2008) External debt, in general and as a whole, is defined as a debt, which is owned by non-residents, foreign lenders or states. External debt is state's financial obligations (foreign loans and unpaid interests on them to foreign lenders as of certain date). External debt defines national debt to international monetary and financial organizations, official government institutions (central banks and governments), private banks, which is subject to payment as scheduled.
Thus, as a result of systematization of scientific and methodical approaches to understanding of internal and external debt, we offer our own interpretation of these notions (Fig. 1).

Fig. 1. The essense of national debt and its main components
We offer to give a comparative characteristics of internal and external national debt according to main features (Table 3).

National debt
External national debt is a total of financial obligations on loans to foreign citizens, states, banks and international financial organizations as for return of money loaned and interests on them in a currency other than hryvnia and as scheduled. Such a loan poses a threat of loss of part of national product and loss of state's credibility.
Internal national debt is a total of obligations of local and regional authorities to residents (enterprises and population), which arise as a result of raising their funds for financing of national programs, orders, development of country's economy, and is accompanied by putting government bonds and other government securities into circulation. Also we think it is necessary to present main factors, which define the tendency towards change of loans amount (Fig. 2).

Fig. 2. Main factors of influence on external and internal national debts
According It is worth mentioning the size of national debt of the country is directly influenced by the changes of volumes of both internal and external debt of the country. That is why with the aim of more effective comparison we propose to make an analysis of dynamics of internal and external national debt of Ukraine during 2006-2015 (Fig. 3).  It should be added that in the structure of debt in the above presented figure guaranteed debt is also presented. At the end of 2015 guaranteed national debt comprised 237.9 mln hrn or 15.1% of total sum of national debt. It is proved such substantial volume of guaranteed debt in Ukraine is negatively reflected on the debt situation and may be the enforcement factor of crisis phenomena in the system of national debt.
It is worth mentioning during the researched period the constant growth of both kinds of debt is observed. Let us pay your attention that during all researched years the external debt was constantly larger than internal, except 2013. Only this year the internal debt was larger than external over 33.7 mlrd hrn. It is vividly shown in Figure 4, where the enlargement comprises 4.22 mlrd US dol.

Fig. 4. Dynamics of national debt of Ukraine and its components during 2006-2015, mln US dol
It is not surprising, but such tendency is positive, as the growth of external debt is more unsafe for economy against the growth of its internal debt. It is explained by the fact, the internal debt leads to real negative economic outcomes: with the interest payment and basic sum of debt the influence of foreign currency is connected, which leads to the lessening of external reserves and shortage of import (so called "exchange risk"). As a supplement to figure 6, we should add the crediting of economy of Ukraine is executed in different currencies, which is firstly connected with creditors. As the experience of most of the countries shows, for operations in world financial market US dollars are used.
In terms of this it should be said in most countries of the world, even in developed ones, in the structure of debt of the country the existence of great part of external component is documented.
But to our mind in debt policy of the country the priority should be given to internal loans. As external loans, especially those received from international organizations, are often accompanied by imposing additional external requirements, including political context, which destroys economic and political sovereignty of the country.
We believe it is necessary to analyze the structure of internal and external debt according to classification, presented in the reports of the Ministry of Finance of Ukraine. Thus, by the conventional index, IND is divided into two components: 1) debt in issued securities in internal market; 2) debt in banking and other financial enterprises.  It is worth paying attention the allocation of END each year to corresponding components differs. For example, in 2006 END was presented only by two articles, particularly: indebtedness by loans, received from international financial organizations and indebtedness by loans, received from the government authorities of foreign countries. Mln. hrn.

Year
Indebtedness towards banking and other financial institutions Internal bonds debt In terms of research of this issue it is worth to add the basic quality feature of national debt burden on the country budget is the internal debt to GDP ratio (Fig. 8).  Year External national debt to GDP National internal debt to GDP National debt to GDP general budget fund (Voloshanuk, Mavdryk, 2016). The sum of costs of national budget necessary for redemption and service of national debt per year, is determined and confirmed by the Law of Ukraine on National budget of Ukraine for the corresponding year (Voloshanuk, Mavdryk, 2016;Ruda, 2015).
Thus, we may confirm, both service expenditures and redemption payments during 2006-2015 demonstrated a negative tendency to growth. On lowering level of debt safety of the country says the rise of up to 50.3% of payments of national debt in budget expenditures. As can be seen from Thus, the value of internal national budget is influenced by the following indexes: internal bonds debt and indebtedness to banking and other financial institutions (Table 5). Evaluation results, presented in Table 5, give the possibility to confirm that negative coefficient at the variable that determines indebtedness to banking and other financial institutions appeared to be not enough statistically significant. The analysis showed the influence on internal national debt of the index has the lessening tendency, which witnesses about the shortage of the sum of this indebtedness article for the 2006-2015 period, which confirms the calculation meaning of correlation coefficient.
In terms of internal bonds debt, the situation is vivid here -the index is statistically significant and positive, as the volumes of this indebtedness always had the growing tendency, and thus the internal debt sum was constantly growing.
Let us go to the evaluation of influence factors on the general value of external national debt.
The results of research presented in Table 6, give the possibility to confirm that among the provided indexes only indebtedness by loans, received from foreign commercial banks, other foreign financial institutions influenced the external national debt on lessening side, about which witnesses calculated correlation meaning (-0.123). It means the dynamics of this indebtedness for the analyzed period is characterized by shortage. The analysis showed the influence of indebtedness by loans received from international financial organizations and indebtedness by loans, received from government authorities of foreign states of total amount of external indebtedness appeared to be the most statistically significant.

Conclusions and perspective of further researches
Conducted analysis gives the possibility to confirm for today the existence of national debt is the common thing for the countries with emerging economy, where there is urgent need for additional financial resources.
In Ukraine the growing dynamics of national debt is further observed, both internal and external, respectively, grows the burden on economy, which witnesses about inefficient policy in the country in the sphere of attracting credit means. An important issue is the keeping to optimal levels of internal and external debts. Thus, as we can see, there is a need in conducting important steps in terms of lessening national debt and its optimization.
These measures are urgent and need immediate actions, as the prevail of external debt in the structure of national debt bears exchange risks. Recently Ukraine is in the state of great dependence from external financing. With the optimization aim of the national debt level it is essential to make its restructure and concentration on internal credit resources and long term loans with fixed interest rates.