LOCAL BORROWING AS A SOURCE OF CAPITAL EXPENDITURES OF LOCAL BUDGETS
Authors: MAKSYMCHUK Oleksandr 
Published: December 2019

Introduction. In Ukraine over the past decades there has been an extremely difficult situation with the renewal of fixed assets. The level of wear of fixed assets at the disposal of public authorities is more than 50%. In this circumstances, the issue of finding resources for financing capital expenditures for updating of the infrastructure, creation of new fixed assets becomes a topical issue. An important role in this process is given to local budgets, which, under decentralization, have broad powers in many areas, including those related to the implementation of capital expenditures. Local borrowing has a significant potential for revenue mobilization, which practically does not used by local authorities. Therefore, the study of this institute is an extremely important area of justification for further improvement of the budgetary system of Ukraine.

Purpose. The purpose of the article is to study legal norms and practices for the implementation of local borrowing, as well as to develop recommendations on how to improve this institution.

Results. As a result of the review of the current legislation, it was discovered that the main drawbacks that inhibit the development of local borrowing in Ukraine are the lack of a methodology for issuing external local loan bonds and the limited access of local councils to the borrowing market. The analysis of statistical data showed a low state of development of the local borrowing market in Ukraine. The main reasons for this situation are the inability of local councils to compete on an equal footing with the state in the financial market; long period of the crisis state of the national economy; low level of experience in the issue of municipal bonds; a large number of bureaucratic procedures and restrictions.

Conclusions. The research showed that the institution of local borrowing in Ukraine is, in fact, at the stage of formation. There are significant shortcomings both in the legislation and in the practice of local borrowing. The least developed in Ukraine is a segment of municipal bonds. The frequency of issuing such loans is low and they are carried out irregularly.

The fact that the municipal bonds market is the most active segment in the market of municipal borrowings of developed countries, gives grounds to assert about its considerable untapped potential in Ukraine. Reforming the budgetary system of Ukraine and increasing the financial autonomy of local authorities can be an impetus for its development in Ukraine. In order to make this possible, it is necessary to stimulate the development of financial market institutions, especially the stock market.

The ways of development of local borrowings are offered as follow: establishment of objective and flexible criteria for obtaining the opportunity to enter the loan market; increase in the number of types of bonds; creation of an intermediary underwriter for bond issue; developing a system of incentives for investors in municipal bonds.

Implementation of the proposed directions, together with a set of measures designed to develop the financial market and increase financial literacy of the population, will ensure greater efficiency of the use of local budgets and the development of the economy.