The Impact of Public Debt on Economic Growth in Ukraine

Abstract

<p><strong>Theoretical background:</strong> The growth in government borrowing, carried out in connection with the banks’ capitalisation, significantly increased the state budget expenditures aimed at servicing the capitalisation domestic public debt, which reinforces the general tendency regarding the exacerbation of the budget risk in the debt sphere in Ukraine. A weighty debt-creating factor was the budget deficit, which was covered by borrowing. Proceeding ahead of the rate of increase in debt volumes in comparison with gross domestic product (GDP) growth rates under the influence of internal and external destabilising factors contributed to the excess of the debt levels security indicators and increased the insolvency risk of the state. The increase of the obligations share denominated in foreign currency or linked to the exchange rate in the overall debt structure as an important indicator of the financial system’s vulnerability to exchange rate fluctuations creates additional threats to debt sustainability regarding the increasing currency risk and the national currency devaluation.</p><p><strong>Purpose of the article:</strong> The article is focused on studying the dynamics and structure of Ukraine’s public debt, its ratio to GDP, and an empirical analysis of the relationship between public debt (external and domestic) and economic growth in Ukraine.</p><p><strong>Research methods:</strong> To empirically test the relationship between public debt and economic growth in Ukraine over the 1992 to 2018 period, multiple regression models were conducted. A real GDP per capita was used as an indicator for economic growth and the debt-to-GDP ratio was used as an index of public debt. Research hypotheses were the following: H1: The public external debt-to-GDP ratio and GDP per capita have a strong negative and statistically relevant correlation; H2: The public domestic debt-to-GDP ratio and GDP per capita have a strong negative and statistically relevant correlation.</p><p><strong>Main findings:</strong> Examining the dynamics and structure of Ukraine’s public debt by borrowing market (external and domestic), it is concluded that there is no strong negative or positive statistically relevant correlation between the public debt-to-GDP ratio and GDP per capita for Ukraine. The impact of this factor is so insignificant that it encourages further research to verify that low GDP growth rate causes the increase in Ukraine’s public debt.</p>

Is Foreign Debt Management in Gabon Efficient?

“…First, the growth of imports requires obtaining the foreign currency needed to pay for them (Kondrat et al, 2019). Second, the level of inflation, which determines the credibility of the monetary authorities, influences foreign currency borrowing decisions because of the crisis of confidence of international lenders in the quality of the domestic currency (Eichengreen et al, 2003).…”

“…The increase in external debt servicing in developing countries (Kondrat et al, 2019), on the one hand, and the problems associated with public debt management when a significant portion of it is denominated in hard currency (Mello (de) et al, 2001), on the other hand, have renewed the problem of the efficiency of managing such a portfolio.…”

Вплив Облікової Ставки На Динаміку Овдп В Україні

“…ОВДП має низку переваг: низька ставка оподаткування, висока ліквідність, низька ризиковість, вищі ставки дохідності. Недоліками є висока вартість операції, висока сума входу на ринок, можливість зловживання щодо спекулятивних дій серед інвесторів, необхідність відкриття декількох рахунків у різних установах [2]. Порівняємо ставки дохідності (рис.…”