Author: Ihor Onyshchuk, Local Budget Expert, Polaris Programme “Supporting Multilevel Governance in Ukraine”
Local budgets in wartime remain one of the key indicators of state resilience. They reflect not only the financial capacity of hromadas but also the ability of the public finance system to maintain critical services, respond to security challenges, and meet the basic needs of the population. An analysis of the first half of 2025 allows us to evaluate the effectiveness of interbudgetary equalization mechanisms, identify the sectors most in need of support, and track growing regional disparities.
In 2025, local budgets in Ukraine came under unprecedented pressure from the war. At the same time, they remain the foundation of community life – ensuring education, healthcare, social protection, maintenance of critical infrastructure, and responses to new challenges. The first half of 2025 highlighted both the strengths and vulnerabilities of the local government financial system.
Despite these challenging conditions, hromadas continue to demonstrate adaptability. Most territorial hromadas show growth in their own revenues, although regional disparities remain significant. State support through transfers plays a critical role, especially in frontline and affected areas, where local budgets lack sufficient fiscal capacity.
At the same time, the expenditure structure indicates increasing pressure on the maintenance of local government bodies, rising costs for salaries and energy, as well as the need to finance defense and security measures. This limits hromadas’ ability to allocate resources to development projects and capital investments.
Inflationary pressures remain an additional challenge. Even with nominal growth in revenues and expenditures, the real capacity of local budgets is significantly reduced, increasing the risk of financial imbalance. Nonetheless, some regions demonstrate positive trends – primarily where hromadas have managed to maintain economic activity and the tax base.
This analytical review, prepared by Polaris Programme expert Ihor Onyshchuk, summarizes the key results and trends in local budget execution for the first half of 2025. The material not only allows an assessment of the current state but also helps to understand which strategic decisions are necessary to maintain the financial resilience of hromadas during wartime.
A detailed analysis is available at the following link.
Source: https://decentralization.ua/news/19996
