Debt Policy of Ukraine in the Conditions of Modernization of Public Finances

Since the full-scale invasion of Russian Federation, public finances (PF) have been operating under conditions of uncertainty and unprecedented security challenges, akin to those experienced by the entire economic system. The level of uncertainty is such that it overshadows the current financial crises and parity with the consequences of the Second World War. This became the core objective of the study, which consisted of substantiating conceptual approaches to the formation of debt policy, considering the peculiarities of the projection of martial law on the functioning of PF. The research employs a systematic approach to methodology, integrating methods of factual and situational analysis that are grounded in international standards for public debt assessment and theoretical generalisations. Furthermore, through a comparative analysis, the interrelationships and mutual influences between debt policy and budget strategy are monitored. Furthermore, the study assesses the potential of leveraging the frozen Russian assets to support Ukraine's post-war recovery through the PF system. The study revealed that the debt policy is an integral component of the PF system. Unlike other program documents, it demonstrated resilience to both endogenous and exogenous challenges and the capacity to implement corrective measures during economic crises. This has laid the foundation for a Marshall Plan-like strategy for Ukraine. The PF strategy, which was approved just before the outbreak of the Russian-Ukrainian conflict, prompted discussions on enhancing the predictability of budgetary policy and debt sustainability. This, together with the adoption of a medium-term public debt management strategy, became the basis for the actual establishment of the Debt Agency as a legal entity, which in the future will ensure, on the one hand, the privileging of grants among the financial mechanisms for covering the budget deficit, and, on the other hand, an additional level of budgetary strategy for generating a multiplier effect from the borrowed funds for post-war reconstruction. On the other hand, this approach will create conditions for the transition from external sources of financing the budget deficit to internal ones by expanding and diversifying the range of investors in government securities. It is proved that debt policy in both the short and medium term will serve as the basis for the implementation of the budgetary strategy of post-war reconstruction, and will create conditions for accelerating the process of forced reparations to compensate for the damage caused by the Russian Federation.