Экономические науки / 3. Региональная экономика
PhD (Economics), N. G. Pigul
Ukrainian Academy of Banking of the National Bank of Ukraine
PhD (Economics), O. V. Liuta
Ukrainian Academy of Banking of the National Bank of Ukraine
THE FINANCIAL CAPACITY AS A BASIS OF THE FINANCIAL
SECURITY OF THE REGION
Significant impact on the sustainable development of the
region has a level of its financial security, which is
defined by the condition of the financial providing of local budgets. Therefore
there is a necessity to solve problems concerning the increasing of financial
capacity of local budgets, which is determined by the adequacy of financial
resources accumulated in local budgets.
Bearing
in mind the existing approaches to interpretation of the category «financial
capacity», we believe that the financial capacity of a local
budget should be defined as the capability of local governance bodies to
exercise local budget expenditures in a timely and proper way, in full
conformity with their own authorities and delegated authorities, in order to
achieve tactical and strategic objectives of social and economic development in
a region through accumulating the sufficient amount of financial
resources.
We believe that the financial capacity of a local
budget consists of the three components characterizing its various dimensions:
financial sufficiency, financial autonomy and financial potential.
Financial
sufficiency of a local budget constitutes an input parameter of the region’s
development, because it means the balance between the financial capabilities
and needs of a territorial unit, and the capability for optimal allocation of
financial resources of local budgets.
Financial
autonomy is a qualitative parameter of the financial capacity of a local
budget, which characterizes its security in terms of internal financial
resources, being largely dependent on the structure of financing sources for
regional development and the reliance on centralized financing sources, which
necessitates flexibility in management of financial resources in a region [1].
Financial
potential, as a component of the financial capacity of a local budget,
determines the capacity to generate financial resources in future, to sustain
the long-term development of a territorial unit.
The financial
capacity of a local budget, therefore, determines the competitiveness of a
region and secures the effective implementation of its economic objectives. In
the regional context, it shows the feasibility of financial security of
regional development in its conformity with the national policy objectives,
regional resources and interests; in the national policy context, it shows
implementation of functions and authorities in conformity with the existing
legal system.
Diagnostics of the financial capacity
of a region calls for analytical study with evaluating its constituent
components, which are the financial sufficiency, the financial autonomy and the
financial potential. This evaluation aims to find out problems, factors behind
their occurrence, reserves and ways to enhance the efficiency of organization
of financial relations at regional level.
We believe that
evaluation of the financial capacity of local budgets should be made by use of
the set of ratios: financial sufficiency – ratio of adequacy of own funds, ratio of adequacy of enshrined financial resources, ratio of local budget
coverage; Financial
autonomy – ratio
of own revenues concentration, ratio of own and enshrined revenues concentration, ratio of subsidized dependency
of local budget; financial potential – ratio of
revenues capacitance, ratio of investments capacitance, ratio of municipal
enterprises profitability.
Therefore, for the objective characteristics of the financial capacity of a local budget can be used integral coefficient
that includes above mentioned ratios.
Enhancement of
the financial capacity of a local budget requires elaboration of measures
aiming to increase the financial sufficiency, the financial autonomy and the
financial potential, which are causally linked and supplement each other and
will help increase the level of financial security territory.
An
important means for the financial sufficiency of a local budget today is saving
of resources, their economically sound allocation and targeted use.
Implementation of these measures requires well-thought administrative decisions
and stricter financial control.
An important issue of local budgets operation in
Ukraine is about increasing of their financial autonomy through revision of
methods for formation of both revenues and expenditures of local budgets, which
is related with implementation of the strategy for extending the autonomy of
local governance bodies. Strategic tasks requiring solutions can be referred to
as follows: increase the influence of local governance bodies on local
budgeting; strengthen the stimuli to increase local budget revenues; create
conditions for exploiting market-based mechanisms to raise additional funds for
development of territorial communities.
The financial potential of local budgets can be increased by introducing
sound territorial planning, implementing programs on support of business sector
as a whole and small business in particular, programs for soft lending; by
enforcing tax privileges and reducing tax inspections.
Essential factors
to secure the financial capacity of a local budget in Ukraine, as a basis of financial security
providing of a region, are measures taken by local governance bodies to
balance financial capabilities and needs of a territory; efficiency of the
financial relations in society; efficiency of formation, flows, allocation and
use of financial resources; formation of rational structure of financial
sources within a territorial unit.
References
1. Люта О. В. Удосконалення методів оцінки фінансової
стійкості місцевого бюджету / О. В. Люта, І. М. Боярко, Н. Г. Пігуль //
Актуальні проблеми економіки. - 2012. - № 9 (135). - С. 194-201.