Public finance management of territorial communities: theoretical and applied discussion

Abstract

This article explores the theoretical discourse on managing public finances (PF) of territorial communities (TCs) in Ukraine under conditions of politico-economic uncertainty and ongoing conflict. It examines the role of PF in addressing societal needs, ensuring economic viability, and promoting financial autonomy within the decentralization framework. Public finances are defined as a system of economic relations encompassing the formation, distribution, and utilization of centralized and decentralized funds to fulfill public interests, aligning with legislative priorities. The study analyzes PF components, including local budgets, communal enterprise revenues, credit resources, and targeted funds, emphasizing transparency in line with IMF fiscal transparency recommendations. The reinstatement of medium-term budget planning through the Budget Declaration for 2025–2027 enhances financial discipline and policy predictability, despite challenges posed by prolonged conflict and defense spending. It is argued that continuing reforms in the financial sector should facilitate the creation of a foundation for sustainable growth in the future, while reforms in public finance, particularly in optimizing expenditures in education and healthcare, will help effectively manage increasing defense-industrial costs, boost tax revenues, and strengthen fiscal discipline and economic efficiency. The banking sector's stability, supported by robust capital and liquidity, fosters economic growth by facilitating credit access for TCs. Suggested strategies for improving PF management, such as income diversification, fiscal consolidation, and strategic planning to mitigate systemic risks. Harmonization with EU financial regulations strengthens competitiveness and attracts foreign investment. The research highlights the importance of public-private partnerships and alternative financing sources like grants and loans to ensure TC resilience. Future studies should focus on overcoming challenges such as limited tax bases, dependency on transfers, and adapting financial strategies to wartime constraints, contributing to sustainable socio-economic development of TCs.