Management of Guaranteed Debt: Shortcomings and Ways for Improvement

Abstract

State-guaranteed debt arises from borrowings by economic entities for the implementation of infrastructure projects under state guarantees, which offers advantages provided there is effective control and minimal corruption risks. However, the imperfection of Ukraine’s practice in managing guaranteed debt leads to an increase in residents’ indebtedness, which transforms into guaranteed debt, while a significant portion of projects remains unimplemented, highlighting the need for improving the monitoring system. State-guaranteed debt constitutes a contingent liability that arises due to the inability of residents to fulfill debt obligations obtained under state guarantees. The absence of a clear methodology for assessing the creditworthiness of economic entities, a specialized management body, and transparent project selection procedures increases corruption risks and threatens debt security. International experience confirms that ineffective management of guaranteed debt leads to a crowding-out effect on investments, hindering economic development. Inadequate control over the use of loans exacerbates the financial burden on the state budget. This necessitates a revision of approaches to providing guarantees to ensure their effectiveness.