The Municipal Bond Market in Ukraine: Practice and Problems

Abstract

The article presents an analysis of problems of the lack of financial resources with regard to Ukraine’s local budgets, which necessitates improvement of the system of mobilizing the income base of local budgets. The problems of dependence of Ukrainian local budgets on the central budget is disclosed, attention is focused on the insolvency of local authorities, which leads to a low level of the socio-economic development of regions. The Ukrainian realities of distributing the bonds of local loans are analyzed. The reasons for the slow development of municipal bonds in Ukraine are diagnosed. Comparisons of the volume of municipal bonds in developed countries and in Ukraine are made, as well as the main reasons for this situation are allocated. Proposals to stimulate the development of the local loan bond market are made forward. Attention is drawn to the low activity of local government bodies in the bond market, which leads to significant losses. Issues of the need to strengthen the financial security of regions are disclosed, which requires local authorities to strengthen their initiative in the search for alternative development resources, as well as to increase the level of interest of city councils and potential investors in municipal securities by increasing their advantage, profitability and the liquidity level. Strategic directions for reforming this market are substantiated and a number of recommendations for achieving them have been formed. It is concluded that in Ukraine the municipal borrowing market contains both significant potential opportunities and a number of challenges related to the general economic situation of the State and the level of development of the financial market, the confidence of potential investors and creditors in the securities market.

Keywords

• municipal bonds
• local budget
• borrowings
• internal credit
• external credit
• loan
• market of securities