Фіскальний простір, стійкість боргу та перехід до інноваційного зростання в Україні: підхід системної динаміки

The purpose of the article is to assess the unique characteristics of government sector debt by employing a system dynamics approach and providing the goodness-of-fit analysis during the war and post-war period in Ukraine. The research formulates a set of proposals for possible post-war period of economic and financial recovery in the context of the debt-to-GDP ratio, fiscal space stability with a transition to an innovation-driven growth model. We use system dynamics tools to analyze and verify data, particularly Stella Architect Software.The research results are the following: the article indicates the presence of an S-shaped growth pattern in national debt relative to GDP, which indicates the necessity for the government to implement the initiatives to start a debt-free economic growth policy to achieve the goal of long-run independent economic policy making via fiscal reforms, tax revenues optimization, and innovations to foster competitiveness mechanisms. The article proves that strategies implemented for debt restructuring can influence public finances, which subsequently impacts the overall financial standing and stability of the government. It is essential for governments to thoroughly evaluate their options and formulate comprehensive debt restructuring strategies that consider both immediate and long-term financial goals. Neglecting to tackle unsustainable debt levels may result in financial crises, the implementation of austerity measures, and adverse effects on social services and public welfare.We prove and conclude that public external debt, fiscal space, and total economic capacity, as the elements of government policy, based on a transition to an innovative growth model, are the core elements to promote economic stability and growth while managing the risks associated with public external debt and the limitations of fiscal capacity. The results of the research are useful for the national government of Ukraine to implement fiscal policy with the elements of debt sustainability and innovative development. The execution of these strategies in managing financial debt and fiscal matters is crucial and will be fulfilled in our further research.