Baltic Journal of Economic Studies (Dec 2024)
ASSESSMENT OF THE FINANCIAL SUSTAINABILITY OF LOCAL BUDGETS UNDER THE INFLUENCE OF REFORMS AND EXTERNAL CHALLENGES
Abstract
The economic development of the country and its regions, the level of well-being of the population, the quality of public services and the availability of public services directly depend on effective local self-government. The article assesses the financial sustainability of local budgets in Ukraine over the past twelve years, identifying the main trends, and examines the changes caused by the implementation of reforms in the country and other external challenges, including the armed aggression against Ukraine. The purpose of the study is to determine further prospects for the development of Ukraine's regions and the formation of effective local self-government, taking into account the results of the analysis of the main indicators of financial sustainability of local budgets. To conduct the study of budgets, a comprehensive methodological approach was applied by calculating an integral indicator, which is the sum of aggregated standardised indicators for three groups of indicators: balance, financial autonomy and efficiency. The study has revealed that there is currently no unified approach to assessing the financial sustainability of local budgets, and scholars propose different methodological approaches with a diverse list of indicators. Based on the generalisation of methodological approaches, the authors propose a system of indicators for assessing the financial sustainability of local budgets in Ukraine. The paper assesses the financial sustainability of local budgets for the period of 2012-2023 with the calculation of an integral indicator and graphical presentation of the analysis results. The study has shown the effectiveness of the implemented reforms in Ukraine, as well as the ability of local authorities to quickly adapt to changes caused by negative external influences. In general, local budgets of Ukraine are characterised by positive trends in their development, with the main indicators of financial sustainability of local budgets being within or close to the recommended values. The dynamics of the integral indicator shows a steady upward trend, with its value increasing from 0.84 in 2012 to 3.12 in 2023, i.e., more than 3 times. The authors conclude that it is advisable to introduce continuous monitoring of the financial sustainability of local budgets according to a single accepted methodology, which will allow the authorities to timely identify changes and promptly make appropriate management decisions, taking into account existing risks, in order to solve problems and form a balanced development strategy.
Keywords
