In current environment, external borrowings have a significant impact on the domestic economy. On the one hand, they are an important tool for the development and stabilisation of Ukraine’s economy, as, if used rationally, they will help maintain budgetary stability and implement the necessary reforms. On the other hand, such borrowings may pose certain risks in the form of an increased debt burden, dependence on creditors, and even a threat to financial independence. For Ukraine, this issue is of particular relevance. Sources of external borrowing include various entities, including: The International Monetary Fund (IMF), the European Bank for Reconstruction and Development (EBRD), the World Bank, individual states, etc. The overarching processes of globalisation are leading to an increase in the economic and political interdependence of states. The presence of external debts affects not only the economic component but also the social sphere. In recent years, Ukraine has been experiencing an upward trend in its external debt. External debt affects debt security, and thus economic and national security in general. The main reasons for the emergence and growth of Ukraine’s public debt include the state budget and balance of payments deficit. Yes, borrowing is tangible and helps to balance the state budget, but it should be noted that this is a temporary measure. In the future, constant borrowing will only increase the debt burden. This leads to negative consequences for the population, in particular in terms of increased taxation. It should be noted that external debt requires repayment, which means regular payments from the budget. The need for such payments causes a shortage of funds for the country’s development and a reduction in funding for relevant government programmes. This suggests that a rational plan for repayment should be developed to minimise the impact of negative consequences on the financing of state development. In addition, the use of borrowed funds should be strictly controlled and used exclusively for the necessary needs. Debt repayment will help create conditions for economic growth, restore confidence in the financial system, attract foreign investment, etc.
Read full abstract