Explicit contingent liabilities of the Ukraine’s Government during the war and pandemic and management of their risks

Abstract

Introduction. The extraordinary conditions of public finances functioning raise the problems of the riskiness of government contingent liabilities and management of their volumes. Ukraine has not created so far a comprehensive system for monitoring fiscal risks and contingent liabilities, assessing their value, disclosing information, and holistic system for managing such liabilities. Problem Statement. The establishment of organizational and methodological pillars for analysis, evaluation, control and compilation of relevant reports on fiscal risks and contingent liabilities, are of great importance for making balanced decisions in the field of public finances. Purpose is to identify key trends and reveal the features of the formation of explicit contingent liabilities of the government in Ukraine during the war and pandemic, and to develop proposals for the creation of a comprehensive system of reporting on contingent liabilities and managing their risks, which will ensure the support of Ukraine’s fiscal sustainability and the adoption of reasonable management decisions. Methods. General scientific and special methods are applied: analysis and synthesis, description and comparison, historical method, method of theoretical generalization and abstract-logical method. Results. The authors find a significant increase in state-guaranteed debt during the pandemic and a drop in its nominal value during the 2022-2023 war that are attributed to the credit market crunch in Ukraine and to the complexity of administrative procedures for obtaining guarantees during martial law. They suggest that government support of certain large state-owned enterprises and small business entities caused problems related to the poor control over expediency of spending budgetary funds and to weak perception of the fiscal risks imputed by government loan guarantees. The IMF’s and the EU’s standards for reporting on fiscal risks and contingent liabilities are summarized, and methodical approaches to assessing the fiscal impact of explicit contingent liabilities are outlined. Conclusions. Risks of contingent liabilities will be mitigated by limiting their volume and assessing fiscal impact, confining the scope of state guarantees provision to the self-sustaining projects, partially shifting the costs of guarantees to private entities (partial guaranties), and reasonable planning of expenditures related to contingent liabilities. In addition, the most complete and correct presentation of information about existing fiscal risks will enhance the degree of policy decisions’ reasoning in the course of fiscal policy implementation.