Abstract
The purpose of the article is to analyse the impact of military expenditures on budget policy in times of war and to assess the effectiveness of the traditional budget model without dividing it into defense and civilian sectors in the context of economic changes. The research methodology combines quantitative and qualitative methods, including comparative analysis, synthesis of literature, analysis of statistical data and correlation analysis using JASP tools, as well as methods of systematization and generalization to identify key factors influencing budget policy. The use of these methods allows for a comprehensive assessment of the dynamics of budgetary indicators and the effectiveness of public financial management in wartime. The correlation analysis showed that the most significant relationship exists between GDP and public debt (r = 0.917 at p < .001), and between military spending and budget revenues (r = 0.970 at p < .001), indicating a strong influence of these factors on the budgetary situation. Modelling based on the X matrix allows forecasting budgetary indicators, including revenues and expenditures, depending on macroeconomic variables such as GDP and military spending, to further improve budget policy. By analysing the impact of military spending on Ukraine’s budget policy, the article identifies the need to improve the financing of the defence sector to ensure macroeconomic stability in times of war. Given the increasing fiscal instability and limited opportunities for economic development due to the growth of military spending, the need to improve the financing of the defence sector was identified.
Keywords: Fiscal Risks, Public Debt, Public Finance, Public Finance Management, Public Financial Sustainability, State Budget.