Sochka Kateryna, PhD (Economics), Associate Professor, Associate Professor of the Department of Accounting and Auditing, Ferenc Rakoczi II Transcarpathian Hungarian University, Berehovе, Ukraine

ORCID: 0000-0002-6247-221X
e-mail: kateryna_sochka@yahoo.com

Intergovernmental Transfers as a Tool of Budgetary Policy: Transformation under Wartime Conditions in Ukraine

Abstract. Introduction. Ukraine’s budget system from 2018 to 2025 was shaped by two interrelated processes: the completion of financial decentralization reform and the transformation of fiscal policy amid wartime conditions. These changes significantly impacted the distribution of financial resources among levels of government and the role of intergovernmental transfers within the public finance system.

Purpose. The study examines the transformation of the intergovernmental transfer system as a means of redistributing financial resources and assesses its evolving role within Ukraine’s budget system under wartime conditions.

Results. The study identifies a structural shift in the dynamics and composition of revenues and expenditures between state and local budgets. This shift is characterized by a pronounced increase in the role of the central government after 2022. While local budgets demonstrated relatively stable positions supported by decentralization reforms in the pre-war period, wartime conditions led to a significant centralization of financial resources. The analysis shows that intergovernmental transfers have undergone a functional transformation, evolving from instruments of fiscal equalization and financing delegated responsibilities into mechanisms of stabilization and resource mobilization. Notably, the increasing significance of equalization grants underscores the imperative to bolster regions impacted by the war, while the substantial surge in reverse grants signifies the reinforcement of horizontal equalization and the expansion of centralized resource accumulation. Concurrently, the reduction in earmarked transfer volumes reflects shifts in financing public services and reallocating expenditure responsibilities.

Conclusions. The findings suggest a shift from a financial decentralization model aimed at strengthening local fiscal autonomy to a recentralization model driven by wartime priorities. This transformation reflects the need to ensure the state’s financial stability under crisis conditions while maintaining the functioning of local budgets. The results underscore the importance of balancing short-term stabilization objectives with long-term incentives for local revenue development when designing intergovernmental fiscal relations.

Keywords: intergovernmental transfers, budgetary system, fiscal decentralization, equalization grant, reverse grant, war-time conditions

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