Balancing state budget expenditures: A case of Ukraine using the simplex method

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The consolidated state budget expenditures reflect the condition of performance by a country of its basic functions and allow defining priority directions for the implementation of state policy. Their optimal ratio allows satisfying the interests of citizens, business and society as a whole, and can provide a significant impetus for economic growth. The analysis of state budget expenditures using the example of Ukraine showed that their structure is unbalanced. Therefore, the purpose of the study was to find the necessary balance. The optimization of Ukraine’s state budget expenditures was carried out using the simplex method based on their structure from 2007 to 2019. Since the priorities of Ukraine’s strategic economic and political development are the implementation of the EU standards and norms, the structure of the EU’s state budget expenditures is chosen as a guideline for determining the optimal structure of expenditures. As a result, it is determined that in order to harmonize the structure of the Ukrainian budget expenditures with the approaches implemented in the European Union, minimal changes in public order spending are required. In addition, significant areas of funding include healthcare, economic activity, social protection and security. At the same time, intergovernmental transfers need to be significantly reduced, the amount of which should be revised after the completion of the financial decentralization reform.

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    • Figure 1. Boxplot of the value of government spending by item for the EU countries in 2010–2018
    • Figure 2. Distribution of EU countries by public spending on social security in 2010–2018
    • Figure 3. Density of distribution of public expenditures in the EU by item in 2010–2018 (the y-axis shows the density, the x-axis shows the options)
    • Figure 4. Average level of government spending as a share of GDP for the EU and Ukraine, 2010–2018
    • Figure 5. Comparison of the obtained optimal and available average levels of distributing state budget expenditures as a share of GDP, %
    • Table 1. Symbols of indicators used to build economic and mathematical optimization model in terms of government spending
    • Table 2. Regression analysis results to identify the relationship between government spending and the integrated coefficient of structural changes in GDP by type of activity
    • Table 3. Descriptive statistics of government spending in the EU, 2010–2018
    • Table 4. Descriptive statistics of government spending in Ukraine, 2010–2019
    • Table 5. Direction and rates of changes in national expenditures, % of GDP
    • Conceptualization
      Inna Shkolnyk
    • Formal Analysis
      Inna Shkolnyk, Volodymyr Orlov, Khaled Aldiwani
    • Methodology
      Inna Shkolnyk, Volodymyr Orlov
    • Supervision
      Inna Shkolnyk
    • Writing – review & editing
      Inna Shkolnyk, Yuriy Ladyka, Yevhenii Kozmenko
    • Data curation
      Yuriy Ladyka
    • Investigation
      Yuriy Ladyka, Khaled Aldiwani, Yevhenii Kozmenko
    • Visualization
      Yuriy Ladyka, Volodymyr Orlov, Yevhenii Kozmenko
    • Writing – original draft
      Volodymyr Orlov, Khaled Aldiwani
    • Validation
      Khaled Aldiwani, Yevhenii Kozmenko