Money, finances and credit

External public debt in the financial system: the practice of national and foreign formation

Economic Annals-XXI

Economic Annals-ХХI: Volume 152, Issue 7-8(1), Pages: 86-89

Citation information:
Dudchenko, V. (2015). External public debt in the financial system: the practice of national and foreign formation. Economic Annals-XXI, 7-8(1), 86-89. https://ea21journal.world/index.php/ea-v152-21/

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Victoria Dudchenko
PhD (Economics),
Associate Professor,
Ukrainian Academy of Banking of the National Bank of Ukraine
57 Petropavlivska Str., 40030, Sumy, Ukraine
v.dudchenko@uabs.edu.ua

External public debt in the financial system: the practice of national and foreign formation

Abstract. Introduction. Under the condition of realization of Ukraine’s ambitions, it is essential to conduct a comparative analysis of the peculiarities of the formation of external public debt of our state as well as the new EU member states and East European countries which keep to the European Neighbourhood Policy. According to the results of such an analysis, we have detected the problems related to the formation of external public debt, identified a link between external public debt and the elements of the financial system, improved the mechanisms of its regulation system. Financial problems of the studied countries have different origin, yet those countries have very similar challenges such as violation of economic sustainability, structural imbalances, deterioration of the debt burden indexes. A study of the formation of external public debt as well as its structure and a clear understanding of its role in the existing financial systems of the mentioned countries should become the basis of a comprehensive approach to the improvement in the effectiveness of the latter as well as to the implementation of the public debt regulation mechanism.

Results. A general trend towards deterioration of the conditions in the debt market both within the European Union and the countries which aspire to join the EU maintained due to the ineffective measures taken in regulating the financial system and unbalanced macroeconomic policies proves that the issues related to the formation of external public debt in the specified countries are characterized by the use of public loan as a tool to increase government expenditure without collecting extra public revenues by the government, which may lead to further deterioration in public finance. According to the selected features, we have detected the role of external public debt relevant to the Ukrainian financial system with regard to the impact of the external public debt on the state budget, the lack of the operations aimed at formation and repayment of external government borrowings, the loss of opportunities to determine the peculiarities of formation of external public debt in the Ukrainian financial system to harmonize structure balance of payments, manage the exchange rate and reduce debt burden in public finances.

Conclusion. The specific features of external public debt formation in the group of studied countries have been described; the factors that cause its dynamics have been selected. The close influence of tools of public expenditures and income management on the external public debt formation and means of monetary policy have been justified. Practical recommendations on improvement of the regulatory mechanism of Ukraine’s public debt through the implementation of new current tasks of debt policy which foresee the definition of significant weight of external foreign debt in the total structure of public debt and the acceptable limit of the expenses in the structure of market and the institutional mechanism of public debt regulation as well as regulatory additions related to the debt policy in coordination with the state monetary and fiscal policy have been provided.

Keywords: External Debt; Financial System; Public Debt Regulation; Debt Policy; Government Credit

JEL Classіfіcatіon: Н60; Н63; Н81; Н 87

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Received 28.05.2015

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