Grant Components in Relationship Lending: Enhancing the Financial Sustainability of Government and Local Loans in Ukraine

Article DOI: https://doi.org/10.57017/jaes.v21.1(91).18

Author(s):

Maksym CHEMERYS Department of Financial and Tax Law of Educational and Research, Institute State Tax University, Ukraine
Ruslana HAVRYLYUK Department of Public Law, Faculty of Law, Yuriy Fedkovych Chernivtsi National University, Ukraine
Petro PATSURKIVSKYY Department of Public Law, Faculty of Law, Yuriy Fedkovych Chernivtsi National University, Ukraine
Dmytro SVIATETSKYI Interregional Academy of Personnel Management, Kyiv, Ukraine
Viktoriia RARYTSKA Higher Educational Institution Podillia State University, Ukraine

Abstract:

This study examines the integration of a grant component into relationship lending frameworks as a mechanism for ensuring the financial sustainability of government and local debt in transitional economies. Focusing on Ukraine’s wartime fiscal transformation, the research analyses how hybrid financing models, combining repayable loans with non-repayable grants, reshape debt dynamics and support structural adjustment under conditions of extreme uncertainty. The study applies comparative analysis, the Public Finance Sustainability Index (PFSI), and multivariate regression modelling with scenario forecasting to a panel of eight countries (Ukraine, Moldova, Georgia, Poland, Hungary, Latvia, Croatia, and Bulgaria) over the period 2020–2024. The results demonstrate that Ukraine exhibits the highest Grant Participation Ratio (GPR), exceeding 0.4 in 2022, while in EU countries it generally remains below 0.1–0.2. Regression estimates reveal a statistically significant positive relationship between the share of grants and fiscal sustainability: a 10% increase in the grant share raises the PFSI by approximately 0.025, whereas a higher loan share has the opposite effect.

Scenario modelling indicates that maintaining a grant share of at least 25% in external financing is a necessary condition for preserving macro-financial stability in Ukraine during 2025–2027. The academic contribution of the paper lies in operationalizing the grant component within a relationship lending framework and embedding it into a quantitative sustainability assessment. Practically, the findings provide policymakers with an evidence-based tool for optimizing loan–grant ratios in public borrowing, particularly in post-conflict reconstruction and decentralization contexts, where fiscal resilience is critical for long-term institutional transformation.

Copyright© 2026 The Author(s). This article is distributed under the terms of the license CC-BY 4.0., which permits any further distribution in any medium, provided the original work is properly cited.

Article’s history: Received 4th of November, 2025; Revised 19th of December, 2025; Accepted 2nd of February, 2026; Available online: 15th of March, 2026. Published as article in the Volume XXI, Special Issue, 1(91), 2026.

How to cite:

Chemerys, M., Havrylyuk, R., Patsurkivskyy, P., Sviatetskyi, D., & Rarytska, V. (2026). Grant Components in Relationship Lending: Enhancing the Financial Sustainability of Government and Local Loans in Ukraine. Journal of Applied Economic Sciences, Volume XXI, Special Issue, 1(91), 351 – 364. https://doi.org/10.57017/jaes.v21.1(91).18

Conflict of Interest Statement: The authors declare that they have no known competing financial interests or personal relationships that could have appeared to influence the work reported in this paper.

Acknowledgments/Funding: N/A

Data Availability Statement: The data that support the findings of this study are available from the corresponding author upon reasonable request.

Ethical Approval Statement: This study is based exclusively on publicly available secondary data and firm-level financial information. No human participants, personal data, or confidential information were involved. Therefore, ethical approval was not required for this research. The authors confirm that the study was conducted in accordance with applicable research integrity and academic ethics standards.

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