Perspectives of offiscal rules implementation in Ukraine and their institutional support

Abstract

Introduction. Ukraine has a pro-cyclical fiscal model according to its effects on the economic cycle and economic dynamics that is unable to provide potential for stabilization of the socio-economic situation. Fiscal policy in Ukraine contributed to the deepening of cyclical fluctuations and negative effects, both on the stage of economic growth before the crisis and in the post-crisis period.

Purpose. The aim of the research is to determine the trends, tools and the necessary institutional support for increasing fiscal flexibility in Ukraine, to identify the conditions and prospects for effective implementation of fiscal rules as the main tool of increasing the countercyclical potential of fiscal policy.

Methodology. The main tool of fiscal flexibility institutionalization is the expanding of fiscal and functional spaces through the implementation of fiscal rules complex. For public finance in Ukraine the implementation of such a mechanism necessitates answers to several questions, including the main ones: to determine the optimal time for implementation; to find the composition of fiscal indicators to be targeting; to identify the scale coverage of public finances. The basic method is the analysis of the experience of implementation of fiscal rules in other countries.

Results. Before the implementation of mechanism of fiscal rules in Ukraine it should be implemented the reform in major problem areas which are tax and pension ones, under the fulfillment of the terms of Memorandum with the IMF within 2-3 years. For fiscal targeting in Ukraine the complex of fiscal aggregates is proposed to be used as the most appropriate one. It consists of the balance or debt rule, andthe rules of expenses.