Analysis of the Impact of State-Owned Banks on the Sustainability of Public Finances

Nadiia Davydenko, Svitlana Boiko, Olena Cherniavska and Maryna Nehrey ()
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Nadiia Davydenko: Department of Public Finance, State Tax University, 08205 Irpin, Ukraine
Svitlana Boiko: Department of Finance, National University of Food Technologies, 03041 Kyiv, Ukraine
Olena Cherniavska: Department of Innovation, Research and Development, Institute of Social and Economic Initiatives, 36014 Poltava, Ukraine
Maryna Nehrey: Department of Economic Cybernetics, National University of Life and Environmental Sciences of Ukraine, 03041 Kyiv, Ukraine

Economies, 2023, vol. 11, issue 9, 1-23

Abstract: This paper aims to provide a retrospective assessment of Ukraine’s state policy concerning state-owned banks and evaluate their impact on the sustainability of Ukraine’s public finances. The research methodology employs an empirical study of the cash flow of public funds to state-owned banks and the reverse cash flow to determine the impact of the activity and stability of public finances. The cash flow to state-owned banks includes the expenditure of public funds for the creation of authorised capital during the establishment of state-owned banks, the acquisition of shares in operating commercial banks, additional capitalisation of state-owned banks, etc. The reverse cash flow comprises dividends paid based on the performance of state-owned banks, as well as revenue generated for public funds through the sale of shares (privatisation) of state-owned banks. This study highlights the costs associated with recapitalising state-owned banks. These costs disrupt the stability of public finances, create additional debt dependency for Ukraine, impose an additional burden on public finances, and lead to structural changes that reduce funding for social spending. As a result, Ukrainian taxpayers are financing the inefficient activities of state-owned banks while experiencing reduced investments in education, healthcare, social protection, environmental protection, and other essential areas.

Keywords: state-owned banks; public finances; domestic government loan bonds; Ukrainian banking system (search for similar items in EconPapers)
JEL-codes: E F I J O Q (search for similar items in EconPapers)
Date: 2023
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