American Journal of Business Management, Economics and Banking ISSN (E): 2832-8078 Volume 35, April - 2025 P a g e | 156 www.americanjournal.org INTERRELATIONSHIP BETWEEN THE FORMATION OF LOCAL BUDGET REVENUES WITH THE ECONOMIC AND INVESTMENT CAPACITY OF REGIONS Yusupov Ruslan Bakhtiyorovich Independent Researcher at TSUE A B S T R A C T K E Y W O R D S This article analyzes the relationship between the process of local budget revenue formation and the economic and investment potential of regions. The impact of regional economic activity, the level of investment attraction, and local production capabilities on budget revenues is shown. Also, differences in revenue formation across regions and their causes are studied, and practical proposals are developed to expand the budget revenue base by improving the investment climate. Local budget, revenue base, economic potential, investment climate, regional development, budget policy, financial stability. Introduction In modern conditions, one of the important financial and economic foundations of the sustainable development of the national economy is largely dependent on the systematic formation of centralized monetary funds at the disposal of the state and the effective financing of socio-economic development programs on a national and regional scale at their expense. Because in ensuring the development of the country's economy within the strategic contours, ensuring sustainable economic growth through the wide attraction of internal and external investment resources to it, financial regulation by the state at one or another phase of its cyclical development has a high multiplier effect. The system of financial regulation aimed at ensuring effective economic growth or macroeconomic stability in one or another phase of the cyclical development of the economy depends on the scale and scope of state revenues formed and distributed through market instruments of primary and redistribution of the national income created in it. In particular, if this process is considered in a logical pragmatic sequence, national income, as one of the main macroeconomic indicators, embodies the main element of GDP and represents the material and financial expression of the value added created on a macro scale. Before researching the nature of income formation of budget system budgets, it is appropriate to research the nature of the state budget as an economic category and its scientific conceptual foundations in modern conditions. American Journal of Business Management, Economics and Banking Volume 35 April - 2025 P a g e | 157 www.americanjournal.org 2. Review of Literature A number of economists have conducted scientific research on the scientific-theoretical, organizational-economic foundations of increasing the revenue base of local budgets by increasing the investment activity of regions and the methodology for its comprehensive assessment. In particular, M. Balanguwer-Coll [1], F. Ballansode [2], G. Boyne, S. Burnside, R. Giniyatullina [3], G. Poliak [4], A. Babich [5], V. Glotov, A. Albekov, E. Alifanova, V. Kuznesova [6], L. Vardomaskaya, M. Soloveykina [7], V. Kovaleva, Romanovsky Foreign economists such as M.V., O. Rublevskaya, B. Sabanti, O. Hordei, T. Kaneva, M. Karpenko, P. Jaquiss, K. Krzysztof have extensively researched the determinants of the stability of the income base of local budgets and factors influencing it. Local economists A. Vakhobov, T. Malikov, A. Juraev, A. Burkhanov, O. Meliev [9], M. Khaidarov [10], Kh. Kurbanov [11], Sh. Musalimov [12], Kh. Kobulov, L. Khazratkulova, S. Elmirzaev, U. Urokov [13] and others have systematized scientific research on the financial stability of local budgets and ways to strengthen it. 3. Analysis and Results Indirect costs affecting the economic development of regions. A vivid example of these costs is the cost of financing the economy and centralized investments. These costs directly affect the development ratios of the regional economy. From the data in Table 1, it can be seen that in 2017, in the city of Tashkent (20151 million soums), Navoi (15447.7 million soums), Tashkent (10225.2 million soums) regions with high economic potential, the share of GRP per capita in the Republic of Uzbekistan was higher than the average indicator (9802.1 million soums). By 2023, the same picture will be observed, that is, the highest nominal value of GRP per capita in Tashkent city (60,648 million soums), Navoi (76,913.1 million soums), Tashkent (35,703 million soums) regions will be higher than the average value of GRP per capita in the Republic of Uzbekistan (average 29,291.4 million soums). Table 1 Gross Domestic (Regional) Product per capita in thousand soums Regions 2017 2018 2019 2020 2021 2022 2023 Growth in 2023 compared to 2017, in % Republic of Uzbekistan 9802,1 12945,7 15863,8 17688,5 21149,2 25151,9 29291,4 298,8 Republic of Karakalpakstan 5932,1 8417,4 10380 11335,4 13264,7 15348,1 16545,8 278,9 Andijan 6612,8 8889,4 10842,1 12036 13454 17179,6 20313,6 307,2 Bukhara 9257,9 11605 14645 16189,2 19546,4 23140,6 26262,9 283,7 Jizzakh 7373 9498,5 11743,8 13207,6 16309,9 18873,2 22342,1 303,0 Kashkadarya 6925,3 8312,3 9924,9 10687 12622 14423,2 16585,1 239,5 Navoi 15447,7 23240,3 36653,1 49513 57370,6 65855,6 76913,1 497,9 Namangan 5721,7 6899,6 8542,4 9814 11794,3 13684,5 15539,5 271,6 Samarkand 7335,8 8693,1 10100,3 10996,3 13258,2 15124,1 17801,6 242,7 Surkhandarya 5788,9 7313,8 8574 9275,2 10948,8 12392 14395,7 248,7 Syrdarya 8399,8 10369,1 14157,3 14999,7 17327,5 20516,9 23804,2 283,4 Tashkent 10225,2 13885,9 18751,9 21833,1 28206,4 31952,4 35703,7 349,2 Fergana 5775,7 7537,1 8747,6 9830 12379 14306,8 16367,9 283,4 Khorezm 6705,4 8734,9 10333,9 11338,6 13865,1 16764,2 18674,9 278,5 Tashkent city 20151 25532,4 33344 36051,4 43166 51435,4 60648,2 300,97 American Journal of Business Management, Economics and Banking Volume 35 April - 2025 P a g e | 158 www.americanjournal.org If we look at the growth rate compared to the beginning and end of the analyzed period, the average growth rate across the republic was 298.8 percent, with higher-than-average growth rates observed in Andijan (307.2 percent), Jizzakh (303.0 percent), Navoi (497.9 percent) regions and Tashkent (349.2 percent) city. However, in all regions, per capita incomes increased by almost 2 times during the analyzed period. The growth of gross regional product per capita is a multifactorial phenomenon, and one of the main factors for its increase in a strategic context is ensuring regional investment activity. It is worth noting that investment activity in the regions primarily depends on the investment and economic potential of each region, and the implementation of investments based on the existing economic potential in the regions forms the basis of an effective regional economic policy ensured at their expense. It is advisable for centralized investments from the republican and local budgets to ensure effective economic growth in a strategic context based on the above factor. Thus, budget investments should not only embody the system of supporting investment activities of the regions, but also perform the function of a balanced territorial distribution of existing state investment resources. Table 2 Volume of investments in fixed capital per capita (in thousand soums) Regions 2017 2018 2019 2020 2021 2022 Growth in 2022 compared to 2017, in % Republic of Uzbekistan 2227,8 3769,6 5834,6 6140,3 6861 7468,6 335,2 Republic of Karakalpakstan 1528,8 3641,1 4644,4 3710 4189,2 5225,5 341,8 Andijan 999,6 1550,3 2406 3047,2 3470,1 4361,1 436,3 Bukhara 6254,2 5112,4 5429,3 6295 10462,9 10855,5 173,6 Jizzakh 1361,9 2693,9 5778,9 8984,7 6470,8 7107,9 521,9 Kashkadarya 3583,4 5193,4 7534,6 6214,7 5148,2 4647,7 129,7 Navoi 4185,5 10892,1 17855,2 15604,2 14672,4 17189,8 410,7 Namangan 1340,3 2992,5 4344,1 4229,2 4477,8 4984,4 371,9 Samarkand 1189,5 1878,3 2674,9 3746 3920,7 4642,5 390,3 Surkhandarya 1427,1 2848,3 4552,8 3792,2 4438,7 4169,4 292,2 Syrdarya 2011,1 3280,2 7002,9 8425,4 9257,1 13919,1 692,1 Tashkent 2087,2 3898,4 6970 7169 9644,5 12056,8 577,7 Fergana 822,4 1516,8 2336,2 2916 3272,3 3917,2 476,3 Khorezm 1215 1655,6 2718,4 2868,2 4344,3 4517,9 371,8 Tashkent city 5552,8 10627,8 16710,5 19065,6 20619,8 19539,4 351,9 From the data in Table 2, we can see that the volume of investments in fixed capital per capita in the Republic of Uzbekistan averaged 2227.8 thousand soums in 2017, while this indicator reached 7468.6 thousand soums by 2022. In 2022, the above-average indicator was recorded in the Bukhara (10855.5 thousand soums), Navoi (17189.8 thousand soums), Syrdarya (13919.1 thousand soums), Tashkent (12056.8 thousand soums) regions and the city of Tashkent (19539.4 thousand soums). American Journal of Business Management, Economics and Banking Volume 35 April - 2025 P a g e | 159 www.americanjournal.org If we look at the growth rate of fixed capital investments per capita at the beginning and end of the analyzed period, it was lower than the average indicator for the Republic (335.2 percent) in Bukhara (173.6 percent), Kashkadarya (129.7 percent), and Surkhandarya (292.2 percent) regions. From this it can be concluded that: Firstly, investment activity in all regions does not show a systematic growth trend in the given period. Secondly, in regions with high investment potential and investment activity, a decrease in the dynamic growth rate of this indicator has been observed in recent years. Thirdly, as a result of the tasks set to increase investment activity in the last 2-3 years in regions with low per capita investment in fixed capital, investment activity has increased sharply. The economic and investment activity of the regions is directly reflected in the formation of local budget revenue opportunities. From the data in Table 3, we can see that the total revenue of local budgets in 2017 amounted to 20547.9 billion soums, while this indicator showed a growth trend in the analyzed periods and reached 55728.9 billion soums in 2023. Compared to the beginning and end of the analyzed period, the highest growth rates of local budget revenues were recorded in Navoi region (4.1 times), Namangan (3.1 times), Tashkent (3.4 times) regions and Tashkent city (3.4 times). By 2023, the largest amount of revenues, both in nominal terms, will fall on the above regions. Table 3 Data on the dynamics of local budget revenues (excluding transfers), in billion soums № Regions 2017 2018 2019 2020 2021 2022 2023 G ro w th i n 2 0 2 3 co m p ar ed t o 2 0 1 7 , ti m es 1 Republic of Karakalpakstan 1485,2 2241,1 2953,3 2743,9 1869,3 2499,5 2843,7 1,9 2 Andijan 1762,9 1708,9 2624,6 2105,9 2418,6 3246,5 3931,2 2,2 3 Bukhara 1335,6 1383 2409,5 1782,9 2374,1 3425,3 3876,5 2,9 4 Jizzakh 766,1 948,3 1240,9 1057,9 1460,4 1822,8 2227,9 2,9 5 Kashkadarya 1786,6 2341,1 3783,9 2468,8 2722,1 3919,9 4607,5 2,6 6 Navoi 745,3 1217,1 1877,8 1540,9 1947,8 2432,9 3039,4 4,1 7 Namangan 1146,2 1360 2237,8 1763 2297,1 3265,4 3516,8 3,1 8 Samarkand 2168,7 1970,8 2567,2 2385,6 3154,8 4197,7 5100,1 2,4 9 Surkhandarya 1138,4 1378,3 1844,9 1605,7 1993,3 2670,6 3043 2,7 10 Syrdarya 629,3 710,2 816,7 716,5 881,7 1147,8 1390,3 2,2 11 Tashkent 1774,9 1949,3 3721,5 2395,5 3734,1 4526 6024,1 3,4 12 Fergana 2153,7 1833,2 3836,1 2677,3 3665,1 4778,5 5169,3 2,4 13 Khorezm 1214,1 1106,3 1467,3 1302,7 1743,1 2384,2 2740,7 2,3 14 Tashkent city 2440,9 2796,4 3752,8 3156,3 4911,4 7073,2 8218,3 3,4 Overall 20547,9 22944 35134,3 27702,9 35172,9 47390,3 55728,9 2,7 American Journal of Business Management, Economics and Banking Volume 35 April - 2025 P a g e | 160 www.americanjournal.org In particular, by 2023, the nominal value of the local budget revenues of Tashkent city will reach 5024.1 billion soums, and the local budget revenues of Tashkent region will reach 8218.3 billion soums. If we consider the dynamic changes in revenues for local budgets, excluding social transfers from the republican budget, we can observe a positive correlation between GRP and investment activity. Thus, we can systematize the initial conclusions based on the following 3 analytical tables: The financial potential that forms the revenues of local budgets primarily depends on the regional economic potential and investment activity. Theoretically, although there is a temporary lag in the impact of investments on economic growth and, in particular, on the growth of local budget revenues, which are its components, it is an important financial factor in the formation of stable revenues in the future. The consistent increase in the revenue potential of local budgets, first of all, creates opportunities for financing standard social services at the expense of these revenues, and these financial resources also create the conditions for financing centralized investments through the budget. This can be seen from the table below. Table 4 Share of budget system budgets as a source of financing fixed capital investments by region, as a percentage of the total Regions \ Years 2017 2018 2019 2020 2021 2022 Republic of Uzbekistan 4,8 4,5 9 6,8 9,3 8 Republic of Karakalpakstan 7,4 3 15,3 12,1 12,4 14 Andijan 4 4,1 8,6 6,3 8,3 8,9 Bukhara 0,9 2,4 7,1 5,8 4,7 4,8 Jizzakh 6,7 9,4 10,8 5,5 9,9 10,8 Kashkadarya 1,5 1,9 3,7 3,6 6,5 8,9 Navoi 5,1 0,7 2,8 1,9 4,6 3,7 Namangan 3,6 2,8 4,9 5,9 8,3 6,6 Samarkand 5,5 2,7 12,1 8 14 9,6 Surkhandayra 7,1 3,2 5,8 7,5 10,8 12,3 Syrdarya 18,7 9,6 10,5 7,8 9,8 6 Tashkent 4,3 3,4 11,5 9,6 8,3 5,8 Fergana 8,2 3,6 8,1 7,6 10 7,4 Khorezm 6,9 5 9,5 8,5 10,2 9,2 Tashkent city 7,2 6 7,6 6,8 8,2 8 From Table 4, we can see that the growth rate of the share of the state budget in fixed capital investments in the Republic of Uzbekistan is expressed in the trend, amounting to 8 percent in 2022. In the same trend, the share of budgets in the structure of sources of financing fixed capital investments in the regions is high in the Republic of Karakalpakstan (14 percent), Andijan (8.9 percent), Jizzakh (10.8 percent). Kashkadarya (8.9 percent), Samarkand (9.6 percent), Surkhandarya (12.3 percent), Khorezm regions (9.2 percent), and Tashkent city (8 percent). The analysis confirms that the trend of changes in local budget revenues in the analyzed periods. American Journal of Business Management, Economics and Banking Volume 35 April - 2025 P a g e | 161 www.americanjournal.org 4. Conclusion 1. Creating a favorable investment and business environment in the regions is the main condition for the sustainable development of the regional economy. Therefore, the priority areas of economic policy require the formation of a legislative framework that ensures a favorable investment and business environment, which requires the implementation of the following measures: 2. A radical improvement in investment and business conditions is the main factor in the economic development of the regions. The sources of financing investment activity depend on the volume of private and public funds formed at the expense of the national income generated in the national and regional economy and the personal income of economic agents that are its components. 3. A favorable business environment and investment activity are ensured by an effective fiscal system, which significantly reduces the tax burden. 4. Increasing the revenue potential of local budgets and achieving their financial stability as a result of expanding the tax base due to a favorable business environment and consistent economic growth; 5. 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