Financial Resilience of Ukraine’s Municipalities During the Russian-Ukrainian War: Empirical Evidence

Abstract

Russia’s war against Ukraine has intensified asymmetries in the socio-economic development of territories, thereby precipitating a radical transformation of the financial foundations underpinning the functioning of Ukraine’s municipalities. This context necessitates the development of differentiated approaches to strengthening municipalities' financial resilience during both wartime and post-war periods. The purpose of this article is to assess the financial resilience of Ukrainian municipalities under conditions of war. The study employs the following research methods: a system-structural approach (to construct an information-analytical model of financial resilience), an integral assessment method (to develop an empirical indicator of municipal financial resilience), and a multiplicative approach (to construct a composite indicator of financial resilience). The information-analytical basis of the study comprises data from all municipalities of Ukraine, classified into four groups, for the period 2021–2025. The findings indicate a weakening in the financial resilience of Ukraine’s municipalities during the full-scale invasion. In rear regions, the dynamics are heterogeneous: municipalities in Lviv Oblast maintained relatively high values, whereas those in Volyn Oblast deteriorated to 0.164 in 2025. Two distinct models of revenue autonomy are clearly observable: (1) a model of regional polarization (in 2023, frontline and occupied municipalities declined to critical levels–Kherson, Luhansk, and Zaporizhzhia Oblasts–while municipalities in Dnipropetrovsk (0.757), Kyiv (0.628), and Poltava (0.558) Oblasts preserved or strengthened their financial resilience potential); and (2) an adaptive model (by 2025, Kyiv (0.771), Poltava (0.760), and Dnipropetrovsk (0.754) Oblasts approached the optimal threshold (0.75), while Lviv (0.654), Cherkasy (0.601), and Kirovohrad (0.594) Oblasts entered the zone of permissible autonomy; municipalities in Luhansk Oblast continue to record zero values). Expenditure autonomy across municipalities in all regions of Ukraine systematically deteriorated throughout the entire period under study. The empirical evidence demonstrates that municipal financial resilience is characterized by internal structural disproportionality. Pronounced fiscal gaps persist, while investment activity remains selective.