FINANCIAL AUTONOMY OF LOCAL AUTHORITIES IN UKRAINE: INVESTMENT POTENTIAL, PROSPECTS, AND CHALLENGES

Анотація

The article aims to assess the current state of financial autonomy of local authorities in Ukraine and to identify key trends, challenges, and prospects for strengthening their financial capacity under wartime conditions and economic transformation. The study focuses on analyzing the sources of financial resource formation for territorial communities, including tax and non-tax revenues, intergovernmental transfers, as well as instruments for attracting investment and grant funding. Theoretical approaches to defining the financial capacity of communities are generalized, and the role of the budgetary mechanism as a foundation for ensuring their autonomy is substantiated. The methodological basis of the research includes a set of general scientific and special methods, in particular analysis and synthesis, comparison, statistical analysis, as well as a systemic and structuralfunctional approach. The use of these methods made it possible to comprehensively assess the dynamics and structure of local budget revenues and to determine the impact of decentralization reform, the COVID-19 pandemic, and the full-scale war on the financial stability of local authorities. Based on the analysis of statistical data for 2018–2025, key trends in the development of local finances are identified. It is established that decentralization reform contributed to strengthening the revenue base of communities in the pre-pandemic period, while the war became a decisive factor in transforming the budgetary system, leading to changes in revenue structure, increased dependence on state support and international assistance, and a shift in financial priorities. The investment potential of territorial communities is analyzed, including foreign direct investment, credit instruments, public-private partnerships, and grant financing, and the main barriers to investment attraction are identified. It is concluded that, despite significant challenges, the financial system of territorial communities and local authorities demonstrates adaptability and gradual recovery. Further improvement of financial support mechanisms, expansion of investment opportunities, and strengthening of institutional capacity are necessary to ensure sustainable development in the post-war period. Keywords: financial autonomy, territorial communities, investment potential, foreign investment, decentralization, grant funding, financial capacity.

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