TRANSFORMATION OF THE FINANCIAL CAPACITY OF TERRITORIAL COMMUNITIES IN UKRAINE IN 2021–2025: DEVELOPMENT TRENDS, STRUCTURAL SHIFTS, AND DIRECTIONS OF STATE POLICY

Abstract

The article presents a comprehensive study of the transformation trends in the financial capacity of territorial communities in Ukraine during 2021–2025 under conditions of martial law, structural socio-economic change, and increasing interterritorial differentiation of development. It is substantiated that the full-scale war has fundamentally transformed the mechanisms for forming the financial base of local self-government, the structure of local budget revenues, the nature of interbudgetary relations, and the capacity of territorial communities to ensure their own financial sustainability. It is proved that the contemporary model of the financial development of territorial communities is being shaped under the simultaneous influence of security risks, business relocation, internal population migration, changes in the employment structure, the transformation of local economic systems, and growing expenditures on maintaining critical infrastructure and ensuring the provision of basic public services. Based on a comparative analysis of the dynamics of the financial capacity of territorial communities according to the categories «high», «optimal», «satisfactory», «low», and «critical», the formation of a polarized model of local development has been identified. This model is characterized by the simultaneous increase in the share of financially capable communities and the preservation of a significant segment of financially vulnerable territories. It has been established that communities with diversified economic structures, developed entrepreneurial environments, advantageous logistical locations, active attraction of internally displaced businesses, and higher levels of managerial adaptability demonstrate the most sustainable financial dynamics. In contrast, communities with a limited economic base, demographic decline, high dependence on intergovernmental transfers, and direct exposure to military actions are characterized by elevated financial risks and limited capacity for autonomous recovery. It has been determined that under wartime conditions the financial capacity of territorial communities is increasingly defined not only by the volume of local budget revenues, but also by the ability of local self-government bodies to ensure the adaptability of managerial decisions, maintain the functioning of critical infrastructure, respond promptly to crisis challenges, and preserve the basic service capacity of communities. It is proved that the intensification of interterritorial inequality creates risks of deepening spatial socio-economic asymmetry, weakening the institutional resilience of certain communities, and increasing the dependence of local development on state financial support.