SHADOW LIQUID BUSINESS CAPITAL: FORMATION AND USE
DOI:
https://doi.org/10.15407/economyukr.2024.08.003Keywords:
shadow economy; investments; systematic risk; capital structure; financial monitoring; corporate finance; shadow liquid capitalAbstract
The amount of Ukrainian business’ losses since the beginning of the full-scale invasion exceeds the state's ability to compensate them. One of the possible sources of funding for business recovery can be shadow reserves, which have been accumulating for a long time outside the financial system. A methodological toolkit has been developed for evaluating the amount of shadow liquid capital as a potential source of business viability support.
Modern approaches to estimating the size of the shadow economy, based on flow indicators, do not allow for determining the amount of shadow liquid capital. To fill this gap, a conceptual approach is proposed, built upon combining data from banking statistics and estimated volumes of illicit capital outflow. Its application made it possible to estimate the amount of shadow liquid capital, which is sufficient to cover 2/3 of direct business losses from the war (as estimated as of the start of 2024) and 100% of the working capital deficit.
It is shown that since the beginning of the full-scale invasion, the volume of capital outflow from Ukraine amounted to USD 40 billion, and business refrained from reinvesting it. The freezing of liquid capital outside the country’s financial system poses a threat to the financial security of the state, generates additional systematic risks, weakens the stability of public finance and limits the supply of capital in the domestic market. During the war, countering the illicit capital outflow is a critical task for the country's financial security. The functional capacity of the policy to combat illicit capital outflow and concealment of income is low, less than 2% of the total amount of shadow income is covered by the available tools. It is proposed to provide for the mandatory declaration of income and property of the ultimate beneficiaries of the business-related parties (shadow liquid capital owners), which will complicate the reinvestment of hidden income and strengthen control over the circulation of shadow liquid capital.
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