Analysis of the state budgets of lower-middle-income and upper-middle-income countries: Evidence from Ukraine and Libya

Abstract

Government regulation plays a crucial role in the formation and development of the economic structure of any modern society. One of the most important financial mechanisms allowing the state to carry out economic and social regulation is the budget. The main purpose of the empirical analysis is to identify common features and differences of the state budgets of Ukraine and Libya. The key indicators of the state budgets of Ukraine and Libya, the dynamics of the structure of budget revenues and expenditures, as well as the dynamics and structure of non-oil revenues of Libya’s state budget are analyzed. It was concluded that the state budget of Ukraine for the study period was formed with a deficit. Libya's state budget has a different trend over the period, but the World Bank experts predict that in 2020 Libya will have a deficit of about 10% of GDP. This situation indicates the need to optimize both revenue and expenditure budgets. Income from foreign governments and organizations exceeded income from capital transactions in 2014, a result of increased international support for Ukraine amid the military conflict. At the same time, political and economic uncertainty in Libya, instability of oil and gas production and exports, instability of state budget revenues, the high share of government budget expenditures in relation to Libya’s GDP, which the government does not plan to reduce, make the problem of optimizing the state budget for Libya more urgent than ever.