Debt strategies of European countries and vectors of implementation of best experience in the practice of external public debt management of Ukraine

Abstract

The policy of external and domestic public debt management in different countries has its own specifics, and its results are not always unambiguous. Thus, the existing recommendations of the International Monetary Fund and the Maastricht criteria prove that the maximum value of public debt to GDP should be no more than 60 %. Exceeding this limit can lead to a deterioration in financial stability, debt sustainability, and ultimately to a technical default of the state. However, the practice of public debt management in many developed countries shows quite opposite trends, as a significant excess of the Maastricht criterion not only does not lead to default, but on the contrary allows countries to accumulate the necessary financial resources to ensure stable economic growth.
 Therefore, the study of European debt strategies and their effectiveness is a very important issue, especially given the consequences of the COVID-19 pandemic for developing countries. Given the growing external debt dependence of Ukraine as a result of both the war with the Russian Federation and the COVID-19 pandemic, the search for a better experience of European debt policy and consideration of ways to adapt it to domestic realities are discussed in our article.
 Based on the analysis of the debt policy of European countries, the expediency of using debt rules, aimed at regulating both the country's debt security and the effectiveness of the use of public borrowing to stimulate economic growth has been proved.
 Cluster analysis of debt strategies of some European countries has shown that the high level of dependence on external public debt has a negative impact on economic security in general, because in the event of deteriorating macroeconomic situation, the likelihood of foreign investors selling government securities increases, and in the case of external loans from international financial and credit organizations – the risks of negative impact of burdensome non-financial obligations on the national economy grow.

Assessment of Ukraine’s external debt burden under geopolitical instability

“…The current external public borrowing management policy paradigm, wherein debt policy is subordinate to national economic development's tactical and strategic objectives to counteract economic and pandemic threats, was examined by Moroz (2021). The study proposes implementing a program-targeted approach to managing external public debt, where funds are solely sourced from international financial organizations for specific government initiatives.…”