Financial Decentralisation as a Factor in the Financial Capacity and Effectiveness of Local Self-Government in Ukraine

This article examines financial decentralisation as a factor in building financial capacity and enhancing the effectiveness of local self-government in Ukraine. It examines the main changes in the formation of the financial base of local communities (hromadas) and analyses the dynamics of local budget revenues for the period 2021–2025. Particular attention is paid to the transformation of local finances under martial law, in particular changes in the generation of revenue from personal income tax and the role of inter-budgetary transfers. It has been justified that a community’s financial capacity is determined not only by the volume of budgetary resources, but also by the stability of its revenue base, the economic activity of the territory and the quality of financial resource management. The study found that financial decentralisation has created the necessary conditions for strengthening the autonomy of local self-government; however, the risks posed by the war have exacerbated disparities between local communities in terms of their financial capacity. The findings summarise international experience of financial decentralisation and identify the main directions for strengthening the financial capacity of local communities during Ukraine’s recovery period.