Some peculiarities of building budgetary sustainability indicators in Ukraine

D.tverdokhlibova

Economy and Forecasting, 2019, issue 4, 24-55

Abstract: To assess fiscal sustainability, the European Commission uses the medium-term and long-term fiscal sustainability indicators S1 and S2. Variables in the formulas of these indicators are compiled according to the methodology of the European System of National and Regional Accounts 2010 in accordance with the Eurostat’s Manual on Government Deficit and Debt. Ukraine compiles the government finance statistics in accordance with the 1986 IMF’s Government Finance Statistics Manual. The same variables of the government finance statistics, compiled according to different methodologies, have different data coverage. Therefore, in Ukraine it is impossible to unconditionally use the formulas of the fiscal sustainability indicators S1 and S2, whose variables are compiled according to the European methodology. The author adapts the fiscal sustainability indicators S1 and S2 to the government finance statistics compiled according to the Ukrainian methodology. The adapted medium-term and long-term fiscal sustainability indicators S1à and S2à differ from their European analogues in that they use the variable of adjusted primary balance instead of the variable of primary balance. The author builds the adapted medium-term and long-term fiscal sustainability indicators S1àâ and S2àâ taking into account the currency structure of government debt. They differ from the adapted fiscal sustainability indicators S1à and S2à, which do not take into account the currency structure of government debt, in that they use the adjusted effective nominal interest rate on the government debt instead of the effective nominal interest rate on the government debt. The difference between the adapted medium-term fiscal sustainability indicators that take into account and do not take into account the currency structure of government debt (S1àâ–S1à), as well as the difference between the adapted long-term fiscal sustainability indicators that take into account and do not take into account the currency structure of government debt (S2àâ–S2à), show the values by which the budget expenditures on the government debt servicing should be additionally adjusted so that such expenditures correspond to the target currency structure of government debt in the medium and long term, respectively. The retrospective data of Ukraine’s government finance statistics (2005-2018), compiled in accordance with the Ukrainian methodology, show how wrong are the estimates of medium-term fiscal sustainability obtained with the use of the European formula of the medium-term fiscal sustainability indicator S1, as well as calculate the estimates of additional adjustments to the Ukraine’s State Budget expenditures on the Ukrainian government debt servicing for different scenarios of the formation of the currency structure of Ukrainian government debt in 2006-2018.

Date: 2019
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