FISCAL RESILIENCE AND ADAPTATION OF MUNICIPAL FINANCES DURING THE WAR: AN ANALYSIS OF LVIV AND KHARKIV

Abstract

The article examines the transformation of Ukraine’s local budget system under the conditions of full-scale war, focusing on its financial resilience as a determinant of territorial community sustainability. The study argues that hostilities have triggered deep structural changes in the national fiscal architecture, testing the effectiveness of decentralization reform and revealing asymmetries in the financial capacity of municipalities. Local budgets, which traditionally ensured socio-economic development, have acquired new functions related to defense financing, humanitarian support, and assistance to internally displaced persons. Using the comparative cases of Lviv (rear city) and Kharkiv (frontline city), the research investigates how security risks, economic disruptions, and demographic shifts affect revenue dynamics, expenditure priorities, and overall fiscal adaptability. The methodological framework combines comparative, statistical, graphic, and elements of econometric analysis based on official data from the Ministry of Finance, the State Treasury Service, and the financial reports of both municipalities. The study identifies two distinct models of fiscal resilience: the survival model, represented by Kharkiv, where local finance concentrates on essential services and immediate recovery, and the adaptive model, exemplified by Lviv, characterized by flexible redistribution of resources and proactive socio-economic stabilization. The research concludes that wartime fiscal resilience depends not only on resource volume but also on managerial adaptability, financial autonomy, and intermunicipal coordination. Strengthening fiscal decentralization, enhancing budget transparency, and developing adaptive models of local financial management are key prerequisites for post-war recovery and sustainable territorial development. The findings contribute to the broader discourse on crisis governance and demonstrate how local fiscal systems can serve as both stabilizing and transformative mechanisms amid complex national emergencies.