DESIGNING TERMS AND CONDITIONS OF WAR BONDS
DESIGNING TERMS AND CONDITIONS OF WAR BONDS

Summary/Abstract: Abstract. With the Russian invasion in Ukraine, the problem of war financing becameextremely topical for our country. To make the optimal decision, our government has toconsider the experience of countries facing the same challenges in the days of the First andSecond World Wars.The paper deals with some aspects of war financing, analyzing the arguments of theproponents and opponents of debt financing, paying particular attention to the most soundreasoning for bond emission instead of raising taxes. While paying heed to military bonds,the paper hones in on the practical issues of war bonds emission during WWI and WWII inbelligerent countries. The subjects of research, in particular, are the following: peculiaritiesof war bonds in different countries in different periods, the purposes of bond emission,procedure of debt securities placement, denomination of bonds and their maturity, couponrate (if any) and procedure of interest rate payment, tax status and marketability of militarybonds. Distinct consideration is given to the analysis of costs of war bonds servicing withregard to the interest rates of corresponding national central and commercial banks.Based on the review of analyzed options, specific proposals are mapped out for thefine-tuning of the terms and conditions of Ukrainian military bond emissions. In particular,the soundness of the advertising campaign preceding and accompanying bonds placement,as well as ways and means of dynamizing investment in war bonds are substantiated.Exploration of the structure of the main customers of Ukrainian war bonds (which appearedto be Ukrainian commercial banks) in parallel with the comparative analyses of the yield onUS and Ukrainian military bonds led the authors to the conclusion of the expediency ofreducing coupon rate on war bonds alongside with the reduction of key policy rate of theNational Bank of Ukraine.

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