IMPACT OF THE UKRAINIAN FINANCIAL CRISIS ON LOCAL SELF-GOVERNMENT FUNCTIONS

Abstract

Since 2014, Ukraine has undergone a major decentralisation reform with the aim of strengthening local self-government, through the transfer of powers, responsibilities and fiscal resources from the central to the local level. However, the full-scale Russian invasion in 2022 has significantly disrupted this process. The ongoing war has caused severe financial instability across all levels of government and led to a functional and fiscal transformation of local self-government bodies. The present article examines the impact of Ukraine's financial crisis on the legal framework, functions and practical operations of local self-government bodies, focusing in particular on three areas: the shift in local functions during wartime, the impact of the financial crisis on local budgets, and the suspension of participatory budgeting and citizen engagement. The study is based on a combined legal and economic analysis, including national legislation and financial data. It is evident that local self-government bodies were obliged to adopt emergency roles, including humanitarian support and civil protection, despite the absence of explicit legal functions in these domains and inadequate financial resources. The crisis has also resulted in a considerable decline in own-source revenues and substantial reductions in interbudgetary transfers. Whilst legal provisions under martial law did indeed allow for a certain degree of flexibility, they also created risks for transparency, democratic accountability, and institutional overload. Notwithstanding the challenges faced, the article emphasises the resilience and adaptability demonstrated by local self-government bodies in Ukraine. The text calls for improved integration of legal safeguards and fiscal stability during periods of crisis, and argues for the urgent need to restore participatory tools during the post-war recovery phase. The findings contribute to broader discussions on decentralisation under the martial law, and offer policy recommendations for strengthening local self-government within the framework of Ukraine's European integration. By examining this critical period, the article provides insight into how local democracy can be protected and rebuilt in times of war and uncertainty.