Budget imbalances in the conditions of the Russian-Ukrainian war

Pysmennyi Vitalii
Doctor of Economics, Professor of Economics and Finance Department, Ternopil Ivan Puluj National Technical University, Ukraine , e-mail: vitaliipysmennyi@gmail.com, ORCID ID: https://orcid.org/0000-0001-7852-3627

Cite this article:

Pysmennyi, V. (2024). Budget imbalances in the conditions of the Russian-Ukrainian war [Biudzhetni dysbalansy v umovakh Rosiisko-Ukrainskoi viiny], Socio-economic research bulletin, Vìsnik socìal’no-ekonomìčnih doslìdžen (ISSN 2313-4569), Odessa National Economic University, Odessa, No. 1-2 (88-89), pp. 92-102.

Abstract

The article substantiates that discrepancies between budget revenues and expenditures arise due to recession, frequent and unjustified changes in tax policy, inexhaustible social needs, etc. Their negative consequences, such as: a reduction in resources for the performance of basic state functions, an increase in internal and external state debt, a decrease in the rate of economic growth, and an increase in the risk of crisis phenomena, are characterized. It is argued that budget imbalances cannot be completely eliminated or avoided, particularly in the long run. The budget imbalances in the pre-war period are analyzed and special attention focused on them after the full-scale russian invasion. The consequences of military operations, which caused an unlimited increase in spending on national security and defense, restoration of damaged infrastructure, and provision of humanitarian aid to war victims, are considered. It was established that the russian-Ukrainian war led to a decrease in tax revenues due to the stoppage of production, mass unemployment and other negative consequences. This has created significant difficulties for the budget balancing and requires a review of spending priorities and the search for additional sources of income to support both military and reconstruction processes. It is substantiated that the war period is characterized by special conditions for the formation and usіng of the state budget, caused by an unlimited increase in expenditures on national security and defense. The measures that would combine tax increases, reduction of certain expenses not related to military purposes, money emission, internal and external borrowing, attracting aid from other states and international organizations are proposed. Attention is focused on the fact that the reduction of discrepancies between budget revenues and expenditures should be systematic and long-term, with an orientation towards ensuring economic growth and social justice.

Keywords

state budget; budget revenues; budget expenditures; budget deficit; budget imbalances.

JEL classification: H600; DOI:https://doi.org/10.33987/vsed.1-2(88-89).2024.92-102

UD classification: 336.143.231"364"

This work is licensed under a Creative Commons Attribution 4.0 International License. To view a copy of this license, visit http://creativecommons.org/licenses/by/4.0/

References

1. Cheberiako, O. V., & Varnalii, Z. S. (2018). Financial preconditions and assessment of defense financing in the conditions of the russian-Ukrainian hybrid war [Finansovi peredumovy ta otsinka finansuvannia oborony v umovakh rosiisko-ukrainskoi hibrydnoi viiny], Naukovyi visnyk Polissia, Vyp. 4 (12), s. 143–149 [in Ukrainian]
2. Zhalilo, Ya. A., Bazyliuk, Ya. B., Sobkevych, O. V. et al. (2022). The strategic price of russian aggression for the economy of Ukraine. Ed. by Ya. A. Zhalilo [Stratehichna tsina rosiiskoi ahresii dlia ekonomiky Ukrainy], NISD, Kyiv, 67 s. [in Ukrainian]
3. Vatamaniuk-Zelinska, U. Z., Pritsak, Ya. M., & Zelinskyi, M.-P. B. (2023). Peculiarities of the formation and execution of the state budget of Ukraine in the conditions of martial law [Osoblyvosti formuvannia ta vykonannia derzhavnoho biudzhetu Ukrainy v umovakh voiennoho stanu], Ekonomichnyi prostir, No. 185, s. 26–31. DOI: https://doi.org/10.32782/ 2224-6282/185-5 [in Ukrainian]
4. Lunina, I. O. (2022). The potential of public finances for expenses ensuring of the war period and the post-war reconstruction of Ukraine [Potentsial publichnykh finansiv dlia zabezpechennia vydatkiv voiennoho periodu ta postvoiennoho vidnovlennia Ukrainy], Finansy Ukrainy, No. 8, s. 7–26. DOI: https://doi.org/10.33763/finukr2022.08.007 [in Ukrainian]
5. Liutyi, I., Rozhko, O., & Liutyi, S. (2022). Optimization of state budget expenditures of Ukraine in war conditions [Optymizatsiia vydatkiv derzhavnoho biudzhetu Ukrainy v umovakh viiny], Svit finansiv, No. 4 (73), s. 45–55 [in Ukrainian]
6. Yakymenko, Yu., & Yurchyshyn, Yu. (2022). Restoration of Ukraine: starting point and directions of government actions. Analytical report [Vidnovlennia Ukrainy: tochka vidliku i napriamy dii vlady. Analitychna dopovid], Kyiv, Tsentr Razumkova, 20 s. [in Ukrainian]
7. Dyba, M. I., Herneho, Yu. O., & Shkoda, T. N. (2022). The potential of financing the reconstruction of the Ukrainian economy of taking into account ESG criteria [Potentsial finansuvannia vidbudovy ekonomiky Ukrainy z vrakhuvanniam kryteriiv ESG], Finansy Ukrainy, No. 7, s. 57–69. DOI: https://doi.org/10.33763/finukr2022.07.057 [in Ukrainian]
8. State Treasury Service of Ukraine: website [Derzhavna kaznacheiska sluzhba Ukrainy: sait]. Retrieved from: https://www.treasury.gov.ua [in Ukrainian]
9. Halytskyi, A. Ukraine is preparing new taxes for FOPs: who will have to pay [V Ukraini hotuiut novi podatky dlia FOPiv: komu dovedetsia platyty], FOCUS.UA: website. Retrieved from: https://focus.ua/uk/economics/631027-v-ukrajini-gotuyut-novi-podatki-dlya-fopiv-komu-dovedetsya-platiti [in Ukrainian]
10. Zanuda, A. Budget-2024: what’s new, interesting, dangerous [Biudzhet-2024: shcho novoho, tsikavoho, nebezpechnoho], BBC News Ukraine: website. Retrieved from: https://www.bbc.com/ukrainian/articles/cj79v32ln9lo [in Ukrainian]
11. Vinokurov, Ya. What about public finances and whether Ukraine will have enough money. Clarification [Shcho z derzhavnymy finansamy ta chy vystachyt Ukraini hroshei. Roziasnennia], Ekonomichna pravda: sait. Retrieved from: https://www.epravda.com.ua/ publications/2022/04/5/685230 [in Ukrainian]
12. Markuts, Yu., Andriienko, D., & Studennikova, I. Draft law on the state budget for 2024: key features [Proiekt Zakonu pro derzhavnyi biudzhet na 2024 rik: kliuchovi rysy], Voks Ukraina: sait. Retrieved from: https://voxukraine.org/proyekt-zakonu-pro-derzhavnyj-byudzhet-na-2024-rik-klyuchovi-rysy [in Ukrainian]
13. Ukraine Support Tracker. The Kiel Institute for the World Economy: website. Retrieved from: https://www.ifw-kiel.de/topics/war-against-ukraine/ukraine-support-tracker.
14. Assistance of international financial institutions to Ukraine (June 2023) [Dopomoha mizhnarodnykh finansovykh instytutiv Ukraini], Natsionalnyi instytut stratehichnykh doslidzhen: sait. Retrieved from: https://niss.gov.ua/news/komentari-ekspertiv/dopomoha-mizhnarodnykh-finansovykh-instytutiv-ukrayini-cherven-2023 [in Ukrainian]