Management of Guaranteed Debt: Shortcomings and Ways for Improvement

Yuliia Verheliuk

MPRA Paper from University Library of Munich, Germany

Abstract: State-guaranteed debt arises from borrowings by economic entities for the implementation of infrastructure projects under state guarantees, which offers advantages provided there is effective control and minimal corruption risks. However, the imperfection of Ukraine’s practice in managing guaranteed debt leads to an increase in residents’ indebtedness, which transforms into guaranteed debt, while a significant portion of projects remains unimplemented, highlighting the need for improving the monitoring system. To assess the role of state-guaranteed debt within Ukraine’s system of obligations, with an emphasis on the challenges of managing and providing state guarantees. The research is based on a normative analysis of the legislative framework, statistical methods for assessing trends in guaranteed debt, and theoretical methods for generalizing the fundamental principles of managing guaranteed debt and the process of providing state guarantees. State-guaranteed debt constitutes a contingent liability that arises due to the inability of residents to fulfill debt obligations obtained under state guarantees. The absence of a clear methodology for assessing the creditworthiness of economic entities, a specialized management body, and transparent project selection procedures increases corruption risks and threatens debt security. International experience confirms that ineffective management of guaranteed debt leads to a crowding-out effect on investments, hindering economic development. Inadequate control over the use of loans exacerbates the financial burden on the state budget. This necessitates a revision of approaches to providing guarantees to ensure their effectiveness. The shortcomings in the management of guaranteed debt in Ukraine, particularly the lack of transparency and creditworthiness assessment, create fiscal risks. There is a need to improve legislation, project selection procedures, and establish a specialized body to enhance efficiency and strengthen debt security. Further research should focus on developing clear criteria for assessing borrowers’ solvency and creating a specialized body for managing guaranteed debt to reduce corruption risks and increase the effectiveness of state guarantees.

Keywords: state-guaranteed debt; state guarantees; debt security; debt management; investment projects; economic development (search for similar items in EconPapers)
JEL-codes: E62 F34 G38 H63 (search for similar items in EconPapers)
Date: 2025-08-08, Revised 2025-08-11
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Published in Economic Journal of Lesya Ukrainka Volyn National University 43.3(2025): pp. 88-95

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