Financial support for the economy development of Ukraine

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State University of Trade and Economics

FINANCIAL SUPPORT FOR THE ECONOMY DEVELOPMENT OF UKRAINE

Igor Chugunov D.Sc. in Economics, Professor, Valentyna Makohon D.Sc. in Economics, Professor Mykhailo Titarchuk Candidate of Economy Sciences, Doctoral student Vladyslav Nychyk Graduate student

Volodymyr Hrehul Graduate student

Kyiv

ABSTRACT

financial economy support management

Preserving the fiscal and financial stability of countries, and supporting economic recovery in order to create conditions for the sustainable growth of a socially inclusive economy is a strategic task of state institutions under martial law. Despite the unpredictability that Ukraine faces in war conditions, it is important to develop a constructive financial instrument for the recovery of the country's economy now. The research is based on the hypothesis that defining the conceptual foundations of financial support for the recovery of the Ukrainian economy, raising the quality level of the financial risk management mechanism, and minimizing their consequences, will help ensure macrofinancial stability. General scientific and special methods are used, namely: dialectical, complex analysis, scientific generalization, selective, scientific abstraction, economic and statistical. Provisions regarding international financial instruments for the economic recovery of Ukraine's economy have been disclosed. A study of the main problems in the financial sphere, which must be solved in the context of the recovery of Ukraine, was carried out. The peculiarities of the implementation of the state programs "Affordable loans 5-7-9%" and "Affordable financial leasing 5-7-9%" are revealed, which play an important role in supporting entrepreneurial activity and ensuring the country's economic security as a necessary prerequisite for ensuring financial stability and recovery countries. It is substantiated that the formation of holistic approaches to the financial support of the restoration of Ukraine, the determination of measures and criteria for the implementation of the state's financial policy will contribute to the solution of the systemic problems facing the state at this stage. Important tasks are: ensuring fiscal and financial stability; neutralization of the influence of negative factors on the financial system; prevention of hidden capital outflow; effective attraction and use of state loans; prevention of legalization of illegally obtained income; ensuring rational distribution and effective use of state financial resources.

Keywords: finance, financial resources, politics, economy, restoration, spending, deficit

АНОТАЦІЯ

Чугунов І, Макогон В, Тітарчук М, Ничик В, Грегуль В.

ФІНАНСОВЕ ЗАБЕЗПЕЧЕННЯ ВІДБУДОВИ ЕКОНОМІКИ УКРАЇНИ

Збереження фіскальної та фінансової стабільності країн, підтримка економічного відновлення з метою створення умов для сталого зростання соціально інклюзивної економіки є стратегічним завданням державних інституцій в умовах воєнного стану. Незважаючи на непередбачуваність, із якою стикається Україна в умовах війни, важливо розробити конструктивний фінансовий інструмент для відновлення економіки країни вже зараз. В основу дослідження покладено гіпотезу про те, що визначення концептуальних засад фінансового забезпечення відновлення економіки України, підвищення рівня якості механізму управління фінансовими ризиками, мінімізація їх наслідків сприятимуть забезпеченню макрофінансової стабільності. Використані загальнонаукові та спеціальні методи, а саме: діалектичний, комплексного аналізу, наукового узагальнення, вибірковий, наукового абстрагування, економіко-статистичний. Розкрито положення щодо міжнародних фінансових інструментів для - відновлення економіки України. Проведено дослідження основних проблем у фінансовій сфері, які необхідно вирішити в контексті відновлення України. Розкрито особливості реалізації державних програм «Доступні кредити 5-7-9%» та «Доступний фінансовий лізинг 5-7-9%», які відіграють важливу роль у підтримці підприємницької діяльності та забезпеченні економічної безпеки країни як необхідної передумови для забезпечення фінансової стабільності та відновлення країни. Обґрунтовано, що формування цілісних підходів до фінансового забезпечення відновлення України, визначення заходів та критеріїв реалізації фінансової політики держави сприятиме вирішенню системних проблем, які постають перед державою на сьогодні. Важливими завданнями є: забезпечення фіскальної та фінансової стабільності; нейтралізація впливу негативних факторів на фінансову систему; запобігання прихованому відпливу капіталу; ефективне залучення та використання державних позик; запобігання легалізації доходів, одержаних незаконним шляхом; забезпечення раціонального розподілу та ефективного використання державних фінансових ресурсів.

Ключові слова: фінанси, фінансові ресурси, політика, економіка, відновлення, витрати, дефіцит

INTRODUCTION

A full-scale war in Ukraine led to the destruction of the country's infrastructure, mass migration and a deep financial and economic crisis. Financial market participants suffered significant losses due to disruptions in financial transactions. Revenues of the state and local budgets decreased, while expenditures increased, primarily in the security and defense sector. Important tasks have become: ensuring fiscal transparency and fiscal stability; increasing the efficiency of budget expenditures and the predictability of budget policy; development of the tax and customs system taking into account European integration processes; activation of the capital markets of Ukraine and their integration into the European financial space; ensuring the availability of credit for business. At the same time, measures by state authorities and financial support from international partners helped stabilize the macroeconomic situation to some extent. It is assumed that the economy will continue to adapt to martial law and financial security risks will decrease accordingly in the medium term. At the same time, the estimate of the change in GDP in 2024 varies from a decrease of 1.5% (estimated by the IMF) to an increase of 3.5% (estimated by the NBU) [17, 19].

In times of war, financial institutions are faced with significant financial problems and the inability to operate in regions where active hostilities are taking place. At the same time, there is a moderate demand for credit resources from corporations, in particular, this is due to the simplification of the conditions for participation in the state program "5-7-9% available loans".

In order to increase the attractiveness of the national currency and reduce pressure on the foreign exchange market, the discount rate was increased from 10% to 25% in June 2022. At the same time, the foreign exchange market is still not capable of self-balancing and needs intervention, accordingly, from July 28, 2023, the discount rate was reduced to 22%, from September 15 to 20%, and from October 27 to 16%. In the medium term, a gradual transition to a more flexible exchange rate, easing of exchange control and a return to the inflation targeting regime is envisaged[19].

The restoration of Ukraine requires an appropriate level of financial support necessary to create conditions for sustainable economic growth and the well-being of citizens based on European values. There is a need to intensify global financial efforts to increase the financial stability of the country and develop the tools of state financial policy in order to increase the effectiveness of the use of state financial resources aimed at restoring the domestic economy[6]. The strategic goal in the implementation of tasks for the restoration of Ukraine is the coordination of the efforts of state authorities and international partners. Despite the unpredictability Ukraine is facing, it is important to design a constructive financial instrument for the restoration of the country now, trying to restore its economy in the conditions of war.

LITERATURE REVIEW

Both domestic and foreign scientists pay considerable attention to the study of financial tools for the economic restoration of the economy. Key issues of economic recovery and development of countries after armed conflicts and wars are revealed in works: A.P. Duka, S.V. Ivanova, O.O. Okhrimenko, R.O. Popova, I. Samokhodskyi [9, 11, 21, 27]. It is determined that the restoration of the country is preceded by a political decision based on national patriotism and geopolitical expediency regarding the restoration and development plan. At the same time, important tasks are the development of the concept of restoration of the economy taking into account the geopolitical situation; state support for certain strategic areas of development that will ensure a high level of competitiveness of goods and services on foreign markets; strengthening control over the use of borrowed funds; introduction of economic mechanisms to combat the shadow sector of the economy; increasing the quality level of social policy [11]. It is justified that the restoration of the country involves both the attraction of foreign financing and the implementation of economic reforms aimed at restoring and revitalizing business activity in the country [21, 5]; the process of rebuilding Ukraine requires conceptualization and a clearly defined model of Both domestic and foreign scientists pay considerable attention to the study of financial tools for economic restoration of the economy taking into account the peculiarities of the country's economic development [23].

According to the research of Irtischev I., Kramarenko I., Sirenko I. "Economics of wartime and postwar economic development: global and Ukrainian realities" it was established that "an important task for the purpose of rebuilding the country is to strengthen the coordination of actions between state authorities and local self-government. Implementation of the concept of sustainable development will expand opportunities for the modernization of economic relations based on the harmonization of the interests of territorial communities with the interests of state authorities [10].

It is determined that the restoration of countries largely depends on the coordination of efforts of the state authorities of a certain country and international partners, while financial assistance should be provided gradually over a decade [7]. Important factors of economic recovery include market and private sector development instruments [16].

Issues of restoring the economy of European countries to ensure stable conditions after the Second World War are revealed in the works: Barro RJ, Choudhry T., Williams Andrew J., Collier P., Heffler A. Aid, Malletta R. and Payne A. [1, 5, 30, 7, 16, 28]. Effective programs for the restoration of Europe include the "Marshall Plan". The answer to which was foreseen: conducting negotiations between the governments of European countries with the aim of promptly concluding multilateral trade and economic agreements; ensuring the cooperation of governments, trade unions, enterprises for the purpose of carrying out coordinated actions regarding the increase of production volumes; freedom to choose strategies for the restoration of countries; focus on strategic recovery in the long term; significant financial support from the USA on an irrevocable and gratuitous basis (90% of the financial assistance was provided in the form of grants) [22, 30].

The impact of war on social development is revealed in the following studies: Boungou W., Yatie A., Umar M., Riaz Y., Yousaf I., Lei L., Aziz G., Sarwar S., Waheed R., Tiwari A., Chen S., Bouteska A., Sharif T., Abedin M., Beraic, M., Amzile K., Laamire J., Zirari O., Amine Fadali M., Izzeldin, M., Muradoglu Y., Pappas V., Petropoulou A., Sivaprasad S. [3, 29, 15, 4, 2, 12]. It is determined that the large-scale military actions in Ukraine caused a surge in price volatility and affected the disruption of global economic activity much more than the oil shocks of the 1970s [4]. The war in Ukraine significantly affected fluctuations in financial markets around the world, in particular, due to non-working Black Sea ports and economic embargoes [2, 3, 4, 28]. It is assumed that the rate of economic growth will decrease to 0.5% in the USA and 0.3% in Ukraine and the EU [12].

Paying tribute to the scientific achievements of scientists in the field of economic recovery and development of countries after armed conflicts and wars, it should be noted the insufficient level of research and justification of the issues of financial tools for the economic restoration of the economy of Ukraine. Large-scale military actions on the territory of Ukraine necessitated the development of new and improvement of existing financial instruments. For this purpose, the peculiarities of state financial policy in the conditions of martial law are revealed.

The research is based on the hypothesis that the determination of the conceptual foundations of financial support for the restoration of the economy of Ukraine, the formation of an effective mechanism of state management of financial risks, aimed at minimizing their consequences, will contribute to ensuring macroeconomic stability and restoring the pace of economic growth. At the same time, the budget, tax and monetary policy should be implemented in a coordinated manner together with the economic policy and ensure the maintenance of structural changes in the national economy. The formation of holistic approaches to financial tools for the economic restoration of the economy of Ukraine, and the determination of measures and criteria for the implementation of state financial policy will contribute to solving systemic problems in the financial sphere and reducing the risks of breaching financial security.

AIMS AND OBJECTIVES

The purpose of the study is to substantiate the peculiarities and strategic objectives of the state's financial policy regarding financial instruments for the recovery of the economy of Ukraine. The aforementioned led to the solution of the following tasks: to reveal the importance of the state's financial policy in ensuring the economic recovery of the country and the conceptual foundations of international financial support for the recovery of Ukraine; to determine the key factors of financial support for the recovery of Ukraine and the main problematic issues in the financial sphere that must be resolved in this context; evaluate the state programs "Affordable loans 5-7-9%" and "Affordable financial leasing 5-7-9%", which play an important role in supporting business activity and ensuring the economic security of the country as a fundamental basis for rebuilding the country and ensuring macro-financial stability.

METHODS

To achieve the outlined goal, the following methods were used: dialectical, complex analysis, scientific generalization - in the process of researching the works of domestic and foreign scientists on the issues of economic recovery and development of countries after armed conflicts and wars, highlighting the role of state financial policy in the economic recovery of countries and provisions on international financial tools for economic restoration of the economy of Ukraine; samples - to highlight the peculiarities of the implementation of the state financial policy of Ukraine in the conditions of martial law; scientific abstraction - to substantiate the factors of financial tools for economic restoration of the economy of Ukraine and the main problems in the financial sphere that must be solved in this context; economic and statistical - to evaluate the main financial and budgetary indicators and state programs "Affordable loans 5-7-9%", "Affordable financial leasing 5-79%". The structure of the main part of the study contains three sections, the first of which is devoted to the disclosure of provisions regarding international financial tools for the economic restoration of the economy of Ukraine. In the second chapter, a study of the main problems in the financial sphere, which must be solved in the context of the restoration of Ukraine, is carried out. The third chapter is devoted to the disclosure of the state programs "Affordable loans 5-7-9%" and "Affordable financial leasing 5-7-9%", which play an important role in supporting business activity and ensuring the economic security of the country as a necessary prerequisite for ensuring financial stability and restoration countries.

RESULTS

International financial tools for economic restoration of the economy of Ukraine Ukraine during the war receives significant international financial support (the war against Ukraine began on February 24, 2024). In particular, in 2022, the consolidated budget of Ukraine received UAH 481.3 billion. of transfers (9.3% of GDP) (Table 1).

In 2023, with the aim of providing financial support to Ukraine, an Interdepartmental Donor Coordination Platform was created, which is aimed at deepening coordination and interaction between financial institutions. According to the report "Second Rapid Assessment of Damage and Reconstruction Needs in Ukraine (RDNA2) as of February 24, 2023, it was determined that the total reconstruction and reconstruction needs of Ukraine for 2023-2033 amount to USD 410.6 billion (Table 2). Most of the financial resources are needed for the restoration of housing, energy infrastructure, and social protection and livelihood.

In 2023, it is proposed to create a new mechanism of financial support for the economy of Ukraine. This mechanism provides for the provision of financial support for the implementation of the strategic tasks of the "Ukraine Recovery Plan"; financial assistance to the private sector, with the aim of revitalizing investment attraction processes; provision of technical assistance. According to the new mechanism of financial support for the economic modernization of Ukraine, it is planned to allocate: EUR 39 billion in the form of non-refundable financial assistance; EUR 8 billionfinancial support for investments; EUR 2.5 billion for measures aimed at supporting Ukraine before joining the EU; EUR 0.5 billiontechnical assistance [24].

Table 1

Transfers from the European Union, foreign governments, international organizations, donor institutions, UAH million. (Source: built by the authors based [18])