Improving public financial management in Ukraine under martial law

Abstract

The relevance of this study is determined by the need to enhance the competitiveness of Ukraine’s territorial communities in the context of martial law, post-war recovery, and the continuing decentralisation reform. Contemporary challenges require local governments to establish an effective institutional environment capable of ensuring sustainable economic growth, financial self-sufficiency, high-quality public governance, and resilience to internal and external risks. These issues are particularly relevant for the territorial communities of Vinnytsia Oblast, which differ considerably in terms of socio-economic development, fiscal capacity, and institutional maturity. The aim of this article is to substantiate directions for strengthening the influence of formal and informal institutions on the competitiveness of territorial communities in Vinnytsia Oblast and to develop practical recommendations for enhancing their institutional capacity. The study employs systems, institutional, structural-functional, comparative, analytical, and logical methods, enabling a comprehensive assessment of the current functioning of territorial communities, the identification of the key institutional factors shaping their development, and the formulation of proposals for improving local governance. The theoretical framework is based on institutional theory, the concepts of good governance, rule-based systems, new public management, endogenous development, and contemporary approaches to local government development. The findings demonstrate that improving the competitiveness of territorial communities requires the integrated development of both formal and informal institutions. The study substantiates the need to improve strategic and spatial planning, strengthen medium-term budgeting and programme-based budgeting, accelerate the digital transformation of local governments, modernise human resource management, introduce performance evaluation systems, and reinforce mechanisms of public accountability. A three-year implementation plan is proposed, focusing on strengthening institutional capacity, increasing investment attractiveness, digitalising governance processes, expanding international cooperation, and enhancing financial resilience. Particular attention is devoted to the development of informal institutions, including trust, social capital, civic participation, collaborative partnerships between public authorities, businesses, and civil society, as well as the strengthening of local identity. The study also demonstrates the potential of adapting the European LEADER approach as a mechanism for mobilising local resources, fostering partnerships, and supporting bottom-up initiatives, thereby strengthening social cohesion and stimulating local economic development. The study concludes that the long-term competitiveness of territorial communities can only be achieved through a balanced combination of effective formal governance mechanisms and well-developed informal institutions that foster trust, cooperation, and civic engagement. The implementation of the proposed recommendations will contribute to improving the quality of public governance, strengthening the financial and institutional capacity of territorial communities, expanding investment opportunities, promoting intermunicipal and international cooperation, and creating favourable conditions for the sustainable socio-economic development of the territorial communities of Vinnytsia Oblast in the context of martial law and Ukraine’s post-war recovery.