The main directions of reduction of debt risks in the medium-term perspective

Abstract

The principles of forming the main directions of policy in the sphere of public debt, aimed at reducing debt risks in the medium term, are considered. The influence of macroeconomic factors on the formation of administrative decisions in the debt sphere is determined and the consequences of measures implemented to support the banking sector in the conditions of the global economic crisis are analyzed. A forecast model has been formed, which provides an assessment of policy changes in the area of public debt under different scenarios ofUkraine's economic development in the medium-term perspective.

In order to increase the effectiveness of measures to reduce debt risk, considerable attention should be paid to the formation of an automated system that provides the process of managing the public debt with the necessary statistical data. At the same time, such a system should regularly undergo an external audit, and the organization of the formation and dissemination of reporting is constantly improved. Legal norms in the debt area should ensure the regular publication of data on the state debt, as well as the results of public administration in this area. Public risk assessment is of great importance for strengthening trust not only for the state debt policy, but also for the public finance system as a whole.

It is also important in this direction to establish an exchange of information between the Ministry of Finance ofUkraineand the National Bank ofUkraine. Such cooperation will promote the necessary coordination during the formation of financial and monetary policy inUkraine. Although such tasks are defined in a number of normative acts ofUkraine, these goals are not realized in practical terms.

Another area of reduction of public debt risks is the establishment of a permanent dialogue between the Ministry of Finance ofUkraineand national and foreign investors. This dialogue is needed to inform about the characteristics of the country's debt portfolio and to get information about the benefits and expectations of investors. Debt managers should try to provide investors with information on borrowing transactions, methods for calculating government debt, interest rate and refinancing risk, maturity structure, derivative instruments, and government guarantees.

Central level bodies should be organized in order to assess the impact of the risks associated with contingent liabilities. Such an assessment can be an integral part of the medium-term public debt management strategy, which is developed annually by the Ministry of Finance and approved by the government.

Contingencies represent potential financial requirements for the government, which may become real requirements in certain circumstances. This primarily concerns financial support measures, state-owned enterprises or other public administration bodies. Other commitments, such as the support of pension funds, should also be taken into account. Deposit Guarantee Funds for individuals, etc. Experience has shown that these contingent liabilities can be very large, especially when they involve recapitalization of the banking system.

In order to minimize costs and risks in the medium to long term, the finance ministry and the government as a whole should take adequate measures to create an efficient government securities market. Such a market will help form a mechanism for financing the state budget without relying on the central bank. In addition, by expanding the capacity and liquidity of the government securities market, the Ministry of Finance, together with the National Bank and public oversight bodies and market participants, can reduce the cost of debt servicing in the medium and long term by reducing the premium for liquidity.