THE IMPACT OF THE RUSSIAN-UKRAINIAN WAR ON PUBLIC FINANCE IN UKRAINE: STATUS AND CONSEQUENCES

Abstract

Under the conditions of the Russian army’s full-scale invasion and Ukraine’s modern defensive warfare, it is imperative to explore the war's impact on the country’s finances. The purpose of this article is to analyze the influence of the Russian-Ukrainian war on public finances in Ukraine using statistical data, assess its condition, and evaluate the economic consequences of the hostilities. The primary research methods included logical, graphical, grouping, statistical, analysis, and synthesis approaches. During the study, key indicators of public finances over the past five years were calculated, including the shares of revenues, expenditures, and the consolidated budget deficit, the Pension Fund, net borrowings, and the state and guaranteed debt in gross domestic product (GDP). The dynamics of these indicators and the impact of the Russian-Ukrainian war on them were analyzed. It was found that after the war began, their share in GDP increased significantly. The most pressing issues for public finances in 2023-2024 were identified as a substantial deficit (21% of GDP), high state debt (over 90% of GDP), and a large proportion of GDP redistribution (75%). A deficit exceeding one-fifth of GDP is highly dangerous as it necessitates continual state borrowings. Under conditions of high inflation, this leads to a debt spiral and the accumulation of critical amounts of public debt, which will be challenging to repay to creditors. The government’s debt policy drains investment resources from private investors and banks, diverting them toward government debt rather than the development of the real economy sector, where significant added value and new jobs are created. A high proportion of public finances in GDP indicates that the Ukrainian economy is losing efficient market self-regulation mechanisms and acquiring an administrative-distributive character. This negatively affects prospects for further economic development and production growth. To mitigate fiscal, debt, and inflationary risks, it is essential to reduce the budget deficit and public debt. Achieving this requires reforms and effective measures to improve the condition and efficiency of public finances and enhance their financial security. The practical value of this article lies in determining, based on statistical data, the impact of the Russian-Ukrainian war on Ukraine’s public finances, identifying the key problems and risks for the economy, and offering proposals for improving public financial management to enhance their condition and mitigate the negative consequences of martial law.