GEOPOLITICAL RISK AS A MACROFINANCIAL INDICATOR: TRANSMISSION CHANNELS OF EXTERNAL SHOCKS TO UKRAINE’S PUBLIC FINANCES

<jats:p>The article investigates geopolitical risk as an independent macrofinancial indicator and its impact on Ukraine's public finance system under conditions of intensifying geoeconomic fragmentation. The global economy is undergoing a structural transformation driven by geopolitical tensions, digitalization, climate risks, and demographic aging, which collectively reshape the macroeconomic policy environment and impose new demands on public finance management. Drawing on data from the IMF Global Financial Stability Report 2026 and the European Commission's European Macroeconomic Report 2026, the article demonstrates that geopolitical shocks transmit into macrofinancial imbalances through three interconnected channels: financial (rising volatility, sovereign yields, and risk premiums), fiscal (growing defense expenditures, debt accumulation, and financing needs), and investment (declining private investment and capital flight). The Geopolitical Risk Index (GPRI), which measures the frequency of references to wars, terrorism, and international tensions in leading media, serves as the primary quantitative instrument for capturing geopolitical instability and linking it to macrofinancial outcomes. Empirical evidence shows that geopolitical shocks simultaneously affect asset prices, energy markets, inflation expectations, interest rates, and financial conditions – with emerging market economies, including Ukraine, experiencing disproportionately stronger negative effects. The geoeconomic fragmentation process – characterized by the erosion of globalization linkages, proliferation of trade barriers, and regulatory divergence – is identified as a systemic destabilizing factor for public finances. Ukraine faces a unique combination of threats: destruction of productive capacity and infrastructure, rising budget deficits and public debt, increased borrowing costs, exchange rate depreciation pressure, and structural dependence on international financial assistance, with a projected financing gap of EUR 20–25 billion in 2026. The article concludes that strategic planning of public finances is no longer merely a budgetary instrument but has become a component of economic security, debt sustainability, and geopolitical autonomy</jats:p>