Evaluating the Impact of Budget Deficit on the Financial Security of the State

Abstract

The article is aimed at evaluating the impact of budget deficit on the financial security of the State by monitoring Ukraine’s budget security indicators for the period 2010-2018 and elaborating proposals to stabilize the system of public finances in today’s economic environment. The components of financial security are disclosed, indicators of budget security are calculated, they are compared with the limits according to the Methodical recommendations for determining the level of economic security of Ukraine, the result is that all indicators range from a satisfactory to a critical range. Based on the analysis of budget security indicators, it is proved that the main actions of the government in this direction should concern stabilizing the economic situation by optimizing the budget spending structure, reducing the volume of public debt and the cost of servicing it. The increase in the budget deficit contributes to the build-up of public debts by the cost of the loans that Ukraine takes to cover the deficit and to repay previous debts, thus creating a debt spiral. Minimizing the budgetary risks will depend on the mechanisms for responding to internal and external challenges and threats, which take place not only in the fiscal sphere, but also in the plane of socio-political transformations in the State. Prospect for further research in this direction lies in proving of the need to introduce new fiscal rules to strengthen the resilience of the public finance system as an instrument of the State regulation of the economy, that best suits the current realities of the country’s development.

Keywords

• budget deficit
• financial security
• indicators of budget security
• public finances
• management of budget deficit