Government debt management: challenges and perspectives

Nowadays one of the relevant problems of economic development of Ukraine is the excessive increasing of the public debt that has a number of negative consequences for the financial system of the country. The article is devoted to the research of state’s debt sustainability concept. Special attention is paid to the development of an effective system of debt sustainability management. The aim of the article is to study the theoretical bases of the state’s debt sustainability, investigate scientific and methodological approaches to its management, analyze the public debt and debt sustainability of Ukraine. In order to achieve that goal, the following scientific methods were used: analysis and generalization, decomposition analysis, comparison and compilation. The authors analyzed the structure of the debt sustainability management system: objects, subjects, key principles, objectives, methods, instruments, etc. The list of key indicators of debt sustainability was substantiated and the authors compared their normative values in Ukraine and in world practice. Besides, the state and structure of public debt and the ratio of government debt to GDP were scrutinized. The obtained results proved the debt crisis deepening in Ukraine.

Public sector financial health coupled with good governance is an indispensable ingredient of the growth route of any particular nation. The financial health antecedents in the public sector include under-spending of capital budgets, going concern and debt management. The study seeks out to scrutinize governance and financial health in an emerging country’s public sector. The study has been directed by the two theories namely, Agency theory and Stewardship theory. Governance hassles may take place in relation with numerous principal-agent affairs as well as stewardship matters. This study is centred on an interpretative philosophy which observed evocative and emblematic content of qualitative data from 24 General Reports on The Provincial Audit Outcomes for the three periods (2012-2013; 2013-2014 and 2014-2015). The findings suggested that most of the provinces have shown a lapsed or little progress in the sufficient monitoring and oversight of the cash flow, capital expenditure and debt management processes at a number of agencies and departments. This resulted in almost all the monies payable to the provinces not collected, capital projects not appropriately managed, suppliers not paid on time, and cash shortfalls to bring on the service delivery targets. The study concludes most of the provinces have revealed that there are no improvements towards minimization of financial risk indicators. It is recommended that public sector agencies leadership must continue to monitor the implementation of revenue collection, effective budget and cash-flow management to ensure that funds are utilized for their projected purposes and the entire monies due are recovered. This will add to improved fiscal health, going concern and service delivery in the public sector.

The paper addresses an estimation of public debt-to-GDP threshold ratio in the developing economy encountered with an excessive public debt impact on macro dynamics. An active field of the study focuses on the internal public debt due to a recent tendency of external share substitution in the developing economies. Among a lot of publications dedicated to the public debt, the study object usually focuses on an array of countries using the same method to evaluate the threshold ratio. Analyzing behavior specifics concerning economy in crises and thereafter, there is a need to carry out the public debt study for the particular economy as well. The research suggests an algorithm for determining internal public debt-to-GDP threshold ratio by applying a scenario modeling tool. Taking into account a growing burden of public debt in Ukraine, the authors have elaborated an econometric macro model operated through fiscal-monetary interaction. The model was used to evaluate the internal public debt-to-GDP threshold ratio in Ukraine. The threshold ratio proves to be 40% of GDP, while the similar result for the total amount of public borrowings is about twice as high. Although the given ratio remained below the estimated threshold as of the mid-term of 2017, a space degree is small and going to collapse soon. Considering sluggish economic recovery following the last recession took place in 2014–2015, Ukraine will face the challenge of reopening the agenda of growing debt burden in a near future.