Transforming public finance under the impact of COVID-19

Tetiana Bogdan,Vitalii Lomakovych

doi:10.21511/pmf.10(1).2021.06

Abstract

Devastating effects of the COVID-19 pandemic throughout the world enhance the societal requests for effective healthcare and social protection systems, modern education, and high-quality infrastructure. In Ukraine, education, healthcare, and social services have been chronically deteriorating, and the corona-crisis has further exacerbated their state and increased poverty in the country. The aim of this study is to reveal the main weaknesses of fiscal policy in Ukraine and to outline the prospects of public finance transformations under the impact of the COVID-19. To achieve this aim, the indicators of fiscal policy response to the pandemic in Ukraine are calculated and a comparative analysis of Ukraine’s public finance structure with the international patterns is undertaken. A moderate fiscal impulse and insufficient fiscal rescue package in Ukraine are shown. Moreover, the inconsistencies of anti-crisis fiscal policy instruments with the international best practice are revealed. Summarizing the available theoretical sources and recent applied research allows identifying the prospects of public finances transformations under the impact of the COVID-19 in a global context. Along with the obtained results of Ukraine’s fiscal sector analysis, these form the basis for shaping the fiscal policy response in Ukraine over the medium term. Proposals for public financing of Ukraine’s health care and educational sectors, of the social safety nets and infrastructures under the impact of the pandemic are developed. Offsetting measures from the expenditure and revenue sides of the budget are drawn up for closing the arising fiscal gaps.

Highlights

Devastating effects of the COVID-19 pandemic throughout the world enhance the societal requests for effective healthcare and social protection systems, modern education, and high-quality infrastructure
The aim of this study is to reveal the main weaknesses of fiscal policy in Ukraine and to outline the prospects of public finance transformations under the impact of the COVID-19
Toporowski and Jump (2020) argued that the challenges facing public finance in most coun- Fiscal impulse is the difference in Cyclically-adjusted primary balance (CAPB) of the tries of the world will push governments to in- current period and previous period; it shows crease tax progressivity in the medium term whether fiscal policy is getting more expansionand achieve a fair share of tax obligations for ary/less contractionary or profitable corporations

Summary

INTRODUCTION

According to Zouhar et al (2021), the main chal- This means that in the post-COVID world, the prilenges facing social protection systems in many ority areas of public investment should be more countries since the beginning of the pandemic in- efficient and adjusted to new challenges healthclude: strengthening the targeted nature of social care system, modern education, extended digital support programs; expanding the scope of such infrastructure, and environmental protection. Toporowski and Jump (2020) argued that the challenges facing public finance in most coun- Fiscal impulse is the difference in CAPBs of the tries of the world will push governments to in- current period and previous period; it shows crease tax progressivity in the medium term whether fiscal policy is getting more expansionand achieve a fair share of tax obligations for ary/less contractionary (in case of positive sign) or profitable corporations In this context, the less expansionary/more contractionary (in case of International Monetary Fund (2020c) recom- negative sign). Lic expenditure in Ukraine, in emerging market countries, and country averages have been used

METHODOLOGY

AND DISCUSSION

Findings

CONCLUSION