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  Ablov ArturUKRAINIAN DEBT POLICY: PERILS AND PROSPECTSKeywords: external debt,   money supply, trade balance, reserve assets, exchange rate.The current stage of the global economy socio-economic development is characterized as  post-crisis or recovery phase. Most of the countries recovered from the global financial crisis; in 200 some of them not only have reached pre-crisis level, but also moved to a ne! stage of their economic development."egenerative processes also affected the economy of #$raine, it may be evidenced by the gro!th of %&' by (,2) in 200, reducing inflation *in 200 it !as +,(), !hich far belo! that ,) in 200+ and reduced current account deficit *for / uarters of 200 current account deficit amounted to 1-/( mln. !hich is /,/) lo!er than in 200+. 3mprovement of macroeconomic indicators is undoubtedly a positive factor for future economic development of #$raine, ho!ever, despite the positive changes this country has a serious problem 4 increasing of gross external debt, !hich reached at the beginning of 20 a record level 4 15,/ bln., representing +,/) of %&' for 200. &uring the (-th uarter of 200 gross external debt increased by /,), and from 6anuary , 2005 to 6anuary , 20 level of #$raine7s external debt has increased by ,2). 8uch a tendency can cause significant external imbalances and serious problems in the macroeconomic situation of the country as a !hole. 3n order to solve this problem, it should be identified its causes at first, both direct and indirect.The main reason for such a massive gro!th of gross external debt is increasing of external public debt. 9nly for the last six months public sector debt increased by 2+) *by 1,  bln., and since early 200+ till the beginning of 20 this indicator rose by 0,) and no! is eual to 12(,+ bln. The bul$ of external public debt is represented by long-term loans *(5,), the national debt in form of bonds and other securities amounts /,) of total external debt. 8hort-term debt accounted for only (,5) of gross external debt, but this figure is gro!ing uite rapidly, only for the last ( uarters it rose 0 times and totaled 12,0 bln.The biggest share of gross external debt belongs to the component :other sectors:, on 6anuary , 20 its liabilities amounted to 10, bln., external debt of other sectors is primarily liabilities of the real sector of the economy and therefore, despite that in absolute terms this component is large, the relative importance of its figure in the least degree may cause the crisis, and the dynamics of this index is the lo!est among all components of the external debt of #$raine. xternal debt of the ban$ing sector from the third uarter of 200 till the third uarter of 200 has been multiplied up +,( times from 1(,( bln. to 1(2, bln., ho!ever, in 200+ and 200 there !as a tendency of ban$ing sector external debt reducing, despite the fact that the  ban$ing system of #$raine has been recognized as one of the least stable in urope. &ue to the fact that every commercial ban$ functioning on the territory of #$raine is obliged to pay a certain amount of reserves for bad loans to the <ational =an$ and this amount is deducted from the profit of the ban$, most ban$s in 200+ proved to be unprofitable. >inancial results are calculated by the formula :arnings 4 "eserves?, as !ell as non-performing loans accounted for large sums, resulting in gro!ing reserves and negative profit. Therefore, ban$s did not attracted foreign loans in 200+ and 200, as they had the appropriate resources, but even paid off the old debts, !hich reduced the external debt of ban$s from 1/+,( bln. at the beginning of 200+ to 12, bln. at the beginning of 20.xternal debt of the monetary authorities on 6anuary , 20 amounted about 15, bln. or ,) of gross external debt, the component :&irect investment@ 3ntercompany lending? amounted to ) of the total external debt of the country.Ao!ever, apart from factors that have a direct impact on the level of gross external debt, there are some factors that have an indirect influence on the countryBs external debt. To  determine the most significant factors affecting the gro!th of total external debt of the country it !as built the regression model, !here the resulting factor !as gross external debt of #$raine, and factor variables !ere economic indicators such as exchange rate, money supply, inflation, interest rate, trade balance, foreign direct investments, etc.Cfter all the tests on the coefficients7 and model7s significance, and exclusion from the model of the least important factors !ere the follo!ing results@&D,5EM2F0,E"-0,02ET=*2,2+; *(,5/; *-(,/2T $r.D2,; &D++,0); > st.D(,((; > $r.D(,52 where ED - external debt; M2 - money supply; ER - exchange rate; TB - trade balance. &irect relation bet!een factor variables of money supply, exchange rate and the resulting factor 4 external debt is uite logical, devaluation and inflation leads to increasing of external debt in value terms. 3nversely proportional relationship bet!een the trade balance and external debt due to the fact that trade balance increasing leads to better current account and the strengthening of the national currency, !hich, in turn, entails valuation reduction of external debt denominated in foreign currencies. 'aradoxical is the fact that the correlation bet!een trade  balance and exchange rate in #$raine is extremely inconsiderably, indicating a !ea$ possibility of the Marshall-Gerner conditions in the context of price approach of balance of payments adaptation. 8uch contradictory results of the model are the conseuences of the prolonged period !hen in our country de facto operated fixed exchange rate.Cfter excluding from the model the period of fixed exchange rate, the correlation coefficient bet!een the trade balance and exchange rate increases from 0,0 to 0,, that is devaluation no! leads to improved trade balance and vice versa.Money supply has a significant influence on the gro!th of #$rainian external debt, since it caused inflation gro!th that leads to a !ea$ening national currency, !hich increases the total gross external debt.Thus, based on these data, to adHust the gross external debt it should be maintained the  balance of :trade balance 4 exchange rate:, as the decline of the exchange rate leads to increasing of external debt and simultaneously to the trade balance improvement, !hich in turn leads to a reduction of external debt. The degree of exchange rate influence on the external debt gro!th is much higher than the degree of trade balance influence on external debt reduction. The increasing of trade balance has an impact on the external debt reduction after a certain period of time, !hile exports increasing not only changes the value of external debt, but also has a positive impact on economic gro!th of the country.&ue to the fact that exchange rate affects the level of external debt the role of foreign-exchange reserves affecting the money supply is follo!ing@I2D40,EG"F+,+E"8 *='*-/,; *2/,(;T JK.D2,5; &D+2,0); > L.D250,55; > JK.D, where M2 - money supply; LR - nterest rate; RE! "B#$ - reser%e assets. Thereby, there is some relationship@ a devaluation leads to trade balance increasing and current account improvement, tat can cause foreign exchange reserves upturn *at constant financial account, on the one hand, and the strengthening of exchange rate on the other. Aence, the reserves gro!th increases the money supply that stimulates external debt expansion, !hereas, the national currency strengthening due to trade balance increasing leads to a external debt reduction. To reduce the money supply negative impact on external debt gro!th the inflation targeting should be applied in #$raine. xport promotion except the exchange rate policy can be achieved through investment inflo! to the manufacturing sector. Thus, it may provide lo!er ris$ of external debt gro!th in terms of inflation, caused by reserves and money supply expansions. Cll this ma$es possible to reduce gross external debt and improve the economic situation in country as a !hole.
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