17.Fiscal management

Financial policy is a very complex notion covering measures aimed at working out basic concepts, major guidelines, goals and objectives, as well as at creating an adequate financial mechanism and at directing financial activities of a country. Financial policy is based on strategic guidelines which set long-term and medium-term prospects for using financial resources and ensure attainment of major economic targets and solution of goals in the social sphere.

Over the past two decades financial problems have exacerbated the world over. Public debts have reached unsustainable levels in a growing number of industrial countries. This development and its results – higher interest rates, lower investment, and slower growth in living standards – have stimulated efforts by policymakers to find solutions to swollen budget deficits.

Central to these solutions is fiscal policy. Fiscal policy is the policy adopted by a government for raising revenue to meet expenditure.

Financial stabilization is the principles, institutional arrangements, information flows, and techniques that govern the budget process and define fiscal relation between levels of government.

Fiscal federalism, which is the system of taxation and public expenditure in which revenue-raising powers and control over expenditure are vested in various levels of government¹ within a nation, ranging from the national government to the smallest unit of local government.

18.Central banking system

The central banking system is a major sector of any modern monetary system. It is of great importance to the fiscal policy of the national government and the functioning of the private sector.

Central banks are responsible for the implementation of monetary policy and supervision over the banking system. They control the money supply, fix the minimum interest rate, act as lenders of last resort to commercial banks with liquidity problems, issue coins and bank notes, influence exchange rates by interventing in foreign exchange markets.

The banking system in U. organized as a 2-tier system. The 1 tier is represented by the NBU; the 2 consist of commercial banks as well as branches and representation of foreign banks.

. The NBU has been using the following main instruments of monetary policy:

-fixed targets for the money supply growth;

-refinancing of commercial banks;

-interest rates;

-open market operations;

-commercial banks reserve requirements;

-foreign currency control;

-direct quantity restrictions.

19. International monetary system

International monetary developments affect all individuals as workers, consumers, travelers, businessmen producing goods for domestic or foreign markets, and investors at home or abroad. The channels which transmit the impact of monetary events to people in their various roles in society are numerous.

The international monetary system is a set of arrangements, rules, practices, and institutions under which payments are made and received for transactions carried out across national boundaries. The international system is concerned not only with the supply of international money but with the relationships among the hundred or so currencies of individual countries and with the pattern of balance-of-payments relationships and the manner in which they are adjusted and settled.

The international monetary system is afflicted with problems. The main reason is that the nations that participate in it are politically independent but economically and financially interdependent.

The international monetary system involves the management, in one way or another, of three processes:

1)the adjustment of balance-of-payments positions, including the establishments and alteration of exchange rates.

2)the financing of payments imbalances among countries by the use of credit or reserves;

3)the provision of international money.