Features of Assessing and Managing Budget Deficits in the Context of Early Post-War Recovery

Purpose: This paper investigates the effect of managing budget deficits in early post-war recovery. The objectives are to determine the deficit’s structural characteristics and acceptable limits, identify the factors behind it, assess the impact of the deficit, debt burden, and interest payments on real GDP growth, and justify instruments to ensure medium-term fiscal sustainability. Design/Methodology/Approach: The study uses a quantitative design that compares Ukraine’s annual macrofinancial indicators for the pre-war (2015–2021) and war/early recovery (2022–2025) periods. The methodology includes structural and comparative analysis, nonparametric testing (Mann–Whitney U test), and multiple linear regression based on quarterly macrofinancial data for 2022–2025. Research Limitation: The study focuses on the war and early post-war recovery period, providing a methodological basis for further research on fiscal sustainability in transition economies. Findings: The study identified a dramatic structural break in deficit parameters between the pre-war and war periods, supported by statistically significant differences in the distribution of the deficit and primary balance. In the war and initial recovery phase, the regression shows that smaller deficits are significantly associated with faster real GDP growth, while the debt burden exerts an additional damping effect. Practical Implication: Acceptable deficit bounds in recovery should rest not on debt ceilings alone but also on the structure of the primary balance and debt service. Social Implication: These findings can inform a fiscally sustainable post-war recovery policy. Originality/Value: The results can help in setting the parameters of a medium-term budget strategy (the deficit-to-GDP ratio, primary balance, debt-to-GDP ratio and share of interest payments in expenditures) that combines recovery expenditures with fiscal prudence.