STRATEGIC PRINCIPLES OF PUBLIC DEBT MANAGEMENT

Abstract

The war waged by the Russian Federation against Ukraine led to a sharp rise in the risks of revenue mobilization and increase in expenditures. The need to attract significant amounts of additional resources, in particular, by expanding borrowing has arisen. A significant increase in debt financing was not foreseen in the medium-term plans, which complicates management decision making during the war. At the same time, debt financing from internal sources is carried out with insufficient activity of private investors. As a result, a tendency towards an increase in the share of domestic government loan bonds owned by the National Bank of Ukraine and banks strengthened, leading to aggravation of financial stability risks. The need to introduce significant changes to the management of public debt obligations, first of all, to update strategic approaches that would involve solving not only current problems, but also those emerging in long- and medium-term perspective, became apparent. To this end, it is necessary to determine the principles of the public debt management strategy not only during the war, but also in the post-war period, to substantiate proposals and recommendations on introducing changes for its implementation. A new Public Debt Management Strategy should be aimed both at financing measures to counter Russian aggression, and at stabilizing the economy in the post-war period and resuming the country's progressive development. For this purpose, it is proposed to envisage several stages of solving the following tasks: i) enlargement of debt expansion, ii) stabilization of public finance, iii) return to the use of fiscal rules, reorientation to economic growth support and financing appropriate measures in emergency situations. When developing the Strategy, the content of the public debt, the purpose of debt management, its goals and objectives should be clarified. It is suggested to supplement it with public debt portfolio (that will reflect a combination of debt instruments taking into account the risks of their implementation), to change the mechanisms of resource mobilization, repayment and servicing of loans, and to restructure and refinance them.