FISCAL SUSTAINABILITY OF SOCIAL TRANSFERS IN UKRAINE’S PUBLIC FINANCE SYSTEM UNDER THE CONDITIONS OF A WARTIME ECONOMY

Abstract

The article examines the fiscal sustainability of social transfers in Ukraine’s public finance system under the conditions of a wartime economy. The study identifies key macro-financial factors that constrain the financing of social expenditures, including a high level of budget deficit, increasing public debt, and strong dependence on external financial support. It is substantiated that the war has caused structural transformations in public finances, leading to a reallocation of budget priorities toward defense spending and social obligations, which creates significant pressure on fiscal stability. Particular attention is paid to the transformation of the structure of social commitments due to the increase in the number of internally displaced persons, veterans, and vulnerable population groups, which generates long-term fiscal risks. The research demonstrates that the existing model of financing social transfers is characterized by a structural imbalance between growing expenditure needs and limited revenue capacity. It is proved that maintaining fiscal sustainability requires a transition from universal to targeted social support mechanisms, which allows for more efficient allocation of limited budget resources. The necessity of implementing a risk-based approach to managing social expenditures is justified, taking into account macroeconomic uncertainty, demographic changes, and external financial risks. The study also highlights the importance of digitalization in improving transparency, reducing inefficiencies, and enhancing the targeting of social assistance. In addition, the paper emphasizes the role of institutional capacity and policy coordination in ensuring the effectiveness of fiscal instruments under crisis conditions. It is argued that without structural reforms and improved governance, the long-term sustainability of social transfers remains vulnerable to both internal and external shocks. Based on the analysis, it is concluded that fiscal sustainability of social transfers depends on the state’s ability to balance its social function with macro-financial stability, ensuring effective resource allocation under conditions of prolonged economic and security challenges. The practical significance of the research lies in the development of approaches to improving fiscal policy and strengthening the resilience of Ukraine’s public finance system.