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PUBLISHED DATE: - 30-08-2024
DOI: -
https://doi.org/10.37547/tajmei/Volume06Issue08-08
ANALYSIS OF THE LEVEL OF THREATS TO
THE SECURITY OF THE COUNTRY'S
ECONOMY
Mamatov Akhmetjon Atajanovich
Doctor Of Economic Sciences, Tashkent State University Of Economics, Uzbekistan
Mamatov Mamajan Ahmadjonovich
Phd Associate Professor Tashkent State University Of Economics, Uzbekistan
Mamatova Dilnoza Bekpulatovna
Phd Associate Professor Tashkent State World Language University, Uzbekistan
INTRODUCTION
One of the main reasons for the financial crises
occurring in the world in the context of the
globalization of the world economy is related to the
problems of foreign debt and its payment. It is not
difficult to observe that the ill-considered foreign
debt policy of many countries ¬has left their
economies weak, dependent on external factors,
vulnerable and vulnerable to dangerous situations.
Public debt is a financial resource of the state
obtained by issuing securities from domestic and
foreign financial markets. Public debt is incurred
when there is a budget deficit.
Public debt has different effects on economic
growth in different countries. In particular,
countries such as South Korea and Japan had a
large amount of public debt in the 1950s and
1960s, but these debts had also a positive effect on
the recovery of the economy and even its
development. Furthermore, in some countries,
especially in Indonesia, the public debt did not give
its results and hindered the economic growth.
Similar patterns can be observed in many
countries.
Public debt plays an important role in the
development of the economy of the Republic of
Uzbekistan. During its independent development,
Uzbekistan ¬has always followed the principle of
long-term and preferential interest rates,
abandoning short-term speculative loans. In his
RESEARCH ARTICLE
Open Access
Abstract
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address to the Oliy Majlis (parliament), the
President of the Republic of Uzbekistan stated that
“in the current complex conditions in the world, we
will consistently continue an open and pragmatic
foreign policy based on mutual trust and respect
[1]. In particular, from 2023, in the management of
public debt in relation to the GDP, the goal is to
ensure that the amount of newly attracted external
debt does not exceed 4.5 billion US dollars per year
[2].”
Background literature
That includes those foreign scientists such as J.M.
Keynes., D. North, A.B. Adams, E. Soto, Dj. Forrester,
S.P. Lee, Ya.L. Ngning, T. Blake, K. Ogawa, M.F. Al-
Refai, E. Kim, G.S. Becker and others who have
studied the impact of public debt on the economy
and its regulation.
Russian scientists V.V. Gerasimov, V.S. Zagashvili,
V.V. Volchik, N. V. Tseikovets, A.V. Kolosov, E. Yu.
Kolesnikov, M. Ya, Kornilov, Yu. V. Latov,
D.D.Burkaltseva, V.A.Bogomolov, A.Prokhojev,
M.Kornilov and others conducted scientific
research work on this topic.
The scientific-theoretical aspects of public debt in
the development of the economy of the Republic of
Uzbekistan and its effective management were
discussed by Abulqosimov Kh.P., Abdupakhmonov
K.Kh., Vakhobov A.V., Jo'raev T.T., Rasulev A.F,
Rasulev T.S. ., Vakhobov A.V., Olmasov A., Mamatov
A.A., Asatullaev X.S., Tursunov B.O., Tokhtaboev
J.Sh., G'aniev D.A., Urmonov J.J., Sh.R. Qabilov and
others conducted scientific research work in this
field.
Foreign scientists P. Zondi and S. Robinson
evaluated the impact of public external debt on
economic growth using the autoregressive
distributed lag model based on statistical data from
1994-2019. According to the results of the analysis,
the impact of the state external debt on economic
growth was positive in the short term. However, in
the long term, the impact of public external debt on
economic growth was negative [3].
Russian scientists Prokhojev A., Kornilov M. He
assessed that security in the foreign economic
sphere is characterized by the country's
competitiveness in the world market, the stability
of the national currency, the state's foreign debt,
and the state's financial situation [4]. Professor
Bogomolov V.A. expressed an opinion on the
importance of foreign debt in the country's
economy, “The problem of foreign debt requires
constant monitoring, because it can have a very
serious negative impact on the country's
development in the long term. He points out that
Latin America's deep, protracted decline in
production and very high inflation caused the crisis
that took place for more than a decade, precisely
because of the large foreign debts”[5].
Among the economists from Uzbekistan D.A.
According to Ganiev, one of the positive aspects of
the state's domestic debt is the impetus for the
development of the domestic financial market.
Because government securities are highly liquid
assets, the demand for them is high in most
cases[6]. According to the research conclusions of
J. J. Urmonov, the development of energy, water
supply,
transport
and
communication
infrastructures, necessary for the population's
living, production and business, requires a large
amount of state investment. In the case of limited
domestic opportunities, the external debt of the
state is directed mainly to infrastructure, industrial
and agricultural projects [7].
From the opinions and analyzes of the above
scientists, we can see that the impact of public debt
on economic growth depends firstly on its size and
secondly on its source.
Research methodology.
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The article includes dialectical, systematic, integral
and synergetic approaches, economic, logical,
scientific abstraction, analysis and synthesis,
modeling of economic processes and systems,
table, comparison, generalization, grouping,
graphic, econometric modeling methods were
used
Analysis and discussion of results
One of the threats to the institutional foundations
of the country's economic security is in the
country's GDP, which is a threat related to the
growth of the state debt and the change in the share
of its service costs in the state budget revenues. As
we may know, the country's economy requires
additional capital for its financial improvement and
economic development. If government spending
exceeds tax revenues, it will lead to a budget deficit,
which will have to be financed by borrowing from
the domestic sector or international governments.
An increase in the share of public debt in the
country's GDP becomes a public debt burden,
which consists of internal and external debts.
Choosing the fastest and painless methods of
solving and managing the problem in the context of
the external debt crisis is of great scientific and
theoretical importance.
Despite the dynamics of the growth of public debt
in the Republic of Uzbekistan in recent years,
according to international standards, the public
debt of the Republic of Uzbekistan (40.4% of GDP),
including public external debt (36.5% of GDP)
remains at a moderate level. It should also be noted
that the International Monetary Fund assesses
Uzbekistan's foreign debt ratio of 55% to GDP as
moderate or stable. In addition, the Fitch Ratings
international rating agency rated Uzbekistan's
long-
term credit rating at the “BB
-
“ (stable) level,
which means that the country has the potential to
attract additional foreign funds.
As of July 1, 2022, the total state debt of Uzbekistan
is 25.9 billion USD, of which 23.2 bln. dollars is the
state's external debt. The public debt is attracted in
the following directions: 6 billion to support the
budget, 5.6 billion to the fuel and energy sector, 2.5
billion for transport and transport infrastructure,
2.4 billion for agriculture and water industry, 2.2
billion for housing and communal services, 1.5
billion to support business activities, 1.1 billion for
the chemical industry, 700 million to support the
education and health sectors, and 1 billion for other
strategic and socially important projects.
By the end of 2020, the total debt of the countries
of the world was 97.6% of GDP (83.5% in 2019).
According to the International Monetary Fund, the
total amount of debt is 89.6 trillion dollars. It was
predicted that this indicator would be 99.5 percent
of GDP in 2021 . The debt of the EU countries was
102% of the GDP, and in 2020, the total GDP
decreased by 14% [8] .
The increase in external debt is certainly a negative
situation, but in the context of the global crisis and
the pandemic, even some countries that are
powerful in financial sense had to borrow money
from international financial institutions. The
question is whether the increase in public debt in
developing countries will help economic growth or
become a burden for future generations to pay.
According to S. P. Lee and Ya. L. Ng, foreign
scientists, the existence of a high amount of public
debt can have a negative impact on economic
development [9]. T. Blake used the ARDL approach
to study the effect of public debt on economic
growth in Jamaica from 1990 to 2014 and found
that debt has a negative effect on economic
growth[10]. A study conducted by E. Kim et al.
found a negative relationship between public debt
and economic growth in 77 countries from 1990 to
2014[11]. M.F. Al-Refai (1990-2013) used the
ordinary least squares (OLS) method to study the
impact of public debt on the Jordanian economy.
According to him, domestic debt and gross fixed
capital formation have a positive effect on
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economic growth in Jordan, but long-term external
debt has a negative effect on economic growth in
Jordan[12].
In our research, since the measurement units of the
data included in the multifactor econometric model
covering the period from 2017 to 2022 in
Uzbekistan were different, they were all
logarithmized and brought to a single
measurement unit. Empirical analysis uses the
logarithm of GDP and debt. The model is estimated
using annual data.
𝐿𝑛𝑌𝐼𝑀 = 𝛽
0
+ 𝛽
1
𝐿𝑛𝐷𝑄 + 𝛽
2
𝐿𝑛𝐵𝑋 + 𝛽
3
𝐿𝑛𝑇𝑄𝑋𝐾 + 𝜀
𝑡
Public debt is a dependent variable on the logarithm of Gross Domestic Product (GDP) in this model.
Whereas public debt (GDP) is an indicator expressed as debt to GDP, which allows determining the direct
impact of public debt on economic growth. The impact of the debt burden on GDP is determined by
including many variables, such as budget expenditure (DB), external debt service (DFS). The problem
under consideration was solved using the STATA program.
Table 1
Descriptive statistics results for factors
LnGDP
LnDQ
LnBX
LnTQXK
Mean
3.841995
3.446209
2.446627
-0.07115
Standard error
0.224312
0.120701
0.155153
0.205447
Median
4.040277
3.514367
2.504033
-0.08244
Standard deviation
0.549449
0.295656
0.380047
0.50324
Kurtosis
-0.05232
1.136631
0.737601
-1.17152
Skevness
-1.04274
-1.20283
-0.85018
0.203988
Interval
1.447852
0.785049
1.077698
1.335001
Minimum
2.939162
2.928524
1.811562
-0.69315
Maximum
4.387014
3.713572
2.88926
0.641854
Sum
23.05197
20.67725
14.67976
-0.42689
The average value (mean), median, maximum and
minimum values of each factor can be seen from
the table data. Other than that, the standard
deviation of each factor (std. dev. (Standard
Deviation) - the coefficient of standard deviation
shows how much each variable deviates from the
average value) is presented.
Skevness is a coefficient of asymmetry, and if it is
equal to zero, it means that the distribution is
normal and the distribution is symmetrical. If this
coefficient is significantly different from 0, then the
distribution is asymmetric (that is, not
symmetrical). If the coefficient of asymmetry is
greater than 0, that is, positive, then the normal
distribution graph for the studied factor is shifted
to the right. If it is less than 0, that is, it is negative,
then the normal distribution graph for the studied
factor is shifted to the left. It can be seen that the
asymmetry coefficients of all factors for the
processes we are studying are less than zero (Table
1) and the function graphs are shifted to the left
(Figure 1). These shifts mainly indicate changes in
the dynamics of the studied factors. In some years,
some factors had a sharp increase, while others did
not change significantly.
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Figure 1. 2017-2022 during state debt with budget expenses graphic analysis
As can be seen in the graph, the budget expenditure is increasing in relation to the public debt, and the
increase in the public debt has decreased after 2020.
Table 2
Correlation matrix between factors
Two types of correlation coefficients can be
determined from the data in Table 2: individual and
pairwise correlation coefficients.
Specific correlation coefficients reflect the
individual correlation of the resulting factor
(lnGDP) with each influencing factor. Pairwise
correlation coefficients reflect relationships
between influencing factors.
It can be seen that the relationship between GDP
(lnGDP) and Public Debt (lnDQ ) is 0.6950. This
shows that these indicators are high. Also, there is
an above-average relationship between GDP
(lnGDP) and budget expenditures (BDP) relative to
GDP, that is, the private correlation coefficient
between them is equal to 0.7774. Gross Domestic
Product (lnGDP) and there is an above-average
relationship between external debt service (DFS) .
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The private correlation coefficient between these
factors is equal to 0.8581.
The values of the pairwise correlation coefficients
in the correlation matrix show that there is no
multicollinearity between the studied influencing
factors. That is, the values of pairwise correlation
coefficients between influencing factors are less
than 0.6. This is the basis for including all factors in
a multifactor econometric model. Calculated values
based on here are an analytical view of the
multifactor econometric model:
𝐿𝑛𝑌𝐼𝑀 = 6,267 − 0.762𝐿𝑛𝐷𝑄 + 0.119𝐿𝑛𝐵𝑋 + 1.252𝐿𝑛𝑇𝑄𝑋𝐾
The calculated multifactor econometric model
shows that the increase in the size of the public
debt (DQ) has a negative effect on the growth of the
Gross Domestic Product (lnGDP). An average
increase of one percent of budget expenditures
(BSE) and external debt service (DFS) relative to
GDP leads to an increase of the Gross Domestic
Product (lnGDP) by 0.119 and 1.252 percent,
respectively.
Now, in our research, we will analyze how the
increase in the share of public debt in the country's
GDP and the change in the share of its service costs
in the state budget expenditures affect the level of
economic security of the country. In the world
experience, the percentage share of public debt
servicing costs in the state budget revenues is
expressed in coefficient indicators from 1 to 10.
This amount represents a change from 1 to 10, a
change in the share of public debt service expenses
in the state budget revenues, a threat to the level of
economic security of the country, i.e. if there is a
coefficient of 1 it is equal to a 10% threat level, if
there is a coefficient of 10 it is equal to a 100%
threat level. For example, in 2021 in the Russian
Federation, this indicator was equal to 10.5
coefficients[13]. So, in 2021, the growth of the state
debt in the Russian Federation and the change in
the share of its service costs in the state budget
revenues indicate that the level of threat to the
economic security of the country is equal to 105%.
Based on the data of the "Open budget" portal of the
Republic of Uzbekistan, we calculated the data on
the public debt in % of GDP in the Republic of
Uzbekistan in 2017-2022, the public debt service
costs (billion soums) and the share of public debt
service costs in the state budget revenues (see
Table 3 see).
Table 3
Analysis of the risk impact of changes in the ratio of public debt to GDP on the country's
economic security [14]
No
GDP
(billion
soums)
State debt
(billion
soums)
Public
debt
to
GDP in %
Public
debt
servicing costs
(billion
soums)
Share of public
debt servicing
costs in state
budget
revenues
To
the
economic
security of the
state
level
of
apprehension
2017 317 476.4
59368, 1
18.7
3129.9
6.3
63%
2018 426 641.0
120739.4
28.3
5220.5
6.6
66%
2019 532 712.5
158215.6
29.7
7739.4
6.9
69%
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2020 605 514.9
236150.8
39.0
9438.6
7.1
71%
2021 738 425.2
280601, 6
38.0
12515.7
7.6
76%
2022 888 341.7
364220, 1
41.0
15947.2
7.9
79%
From the data of the table, it can be seen that in the
Republic of Uzbekistan, the cost of servicing the
state debt in 2017 was 3129.9 billion. from soums,
15947.2 billion by 2022 . increased to soums, and
as a result, the share of public debt service
expenses in state budget revenues changed from
6.3 to 7.9, respectively. This shows that the level of
threat to the economic security of the state has
increased from 63% to 79% today. Based on the
econometric analysis, we made the following
conclusions:
•
GDP (lnGDP) and Public Debt (lnDQ) is
0.6950. This shows that these indicators are
high among;
•
As the growth of the public debt (DQ) has a
negative impact on the growth of the Gross
Domestic Product (lnGDP). An average
increase of one percent of budget revenues
(BD) and external debt service (DFS) relative
to GDP leads to an increase of the Gross
Domestic Product (lnGDP) by 0.119 and
1.252 percent, respectively;
•
In the Republic of Uzbekistan , the share of
public debt service costs in the state budget
revenues will increase from 6.3 in 2017 to
2022 increased to 7.9. This shows that the
level of threat of the state debt to the
economic security of the State has increased
from 63% to 79%.
•
The increase in the level of public debt threat
to the economic security of the state from
63% to 79% means that the Republic and
local state executive authorities in
Uzbekistan should develop appropriate
measures to reduce its growth.
CONCLUSION
In conclusion, in the context of the globalization of
the world economy, in order to ensure the
economic growth of the state and optimize the
state debt, the following is proposed:
•
in order to prevent economic crises
occurring in the world economy, pandemics
and economic crises arising as a result of
military operations, attracting foreign loans
at reduced preferential rates as a means of
reducing the state budget deficit;
•
to increase the transparency of budget
revenues and ensure the efficiency of
expenditures, reduce the external debt of the
state, increase tax revenues by reducing the
scale of the hidden economy, and improve
tax administration;
•
Increasing the weight of sovereign
international bonds of the Republic of
Uzbekistan, especially national currency
sovereign
international
bonds,
in
international financial markets;
•
Development of a methodology for
determining the safe level of public debt
relative to GDP (60 percent) and
determining its optimal amount.
Summing up from the above, borrowing should be
aimed at improving the socio-economic situation of
the country, ensuring economic growth, reducing
the budget deficit, improving infrastructure
facilities, providing social support to the
population, and creating a favorable investment
climate for entrepreneurship. It will be necessary
to develop mechanisms to control borrowing and
its targeted spending without exceeding the
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established economic standards. Because the debt
burden should not hinder the development of the
future generation and serve development.
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