THE ROLE OF INTERBUDGETARY TRANSFERS IN ENSURING FISCAL DECENTRALIZATION OF REGIONS

Abstract

The key tool for redistributing financial resources between levels of the budget system is inter-budgetary transfers, which are designed to reduce disparities in the socio-economic development of territories and guarantee the provision of basic public services regardless of the level of the revenue base of local budgets. The complexity of budget processes under martial law, the growth of expenditure obligations, and the uneven financial capabilities of regions enhance the role of intergovernmental transfers in ensuring the stability of the budget system, while at the same time actualizing the problem of their impact on deepening fiscal decentralization. The topic of intergovernmental relations is extremely relevant in conditions of full-scale war and economic instability, since effective financing of local budgets directly affects the livelihoods of communities and the development of regions. Analysis of the transfer system and their impact on the financial autonomy of local governments allows us to identify key problems and ways to overcome them, which is important for the formation of sustainable and flexible mechanisms of state support for territorial communities. Inter-budgetary relations in Ukraine support the viability of local budgets, but they exacerbate regional inequality, limit the autonomy of local government, and require more flexible resource allocation mechanisms that take into account the real needs of communities, especially in times of crisis and war. The article analyzes the dynamics and problems of intergovernmental relations in Ukraine in the period 2020–2024 with an emphasis on the impact on regional develop-ment. It examines the change in the volume of transfers, the share of transfers in local budget revenues, and the structural features of community financing before and during martial law. Key problems were identified: high dependence of local budgets on transfers, fiscal asymmetry between regions, prevalence of targeted subventions, and limited financial auton-omy of communities. Directions for overcoming the shortcomings of the system are proposed, in particular: increasing local budgets' own revenues, improving the structure of transfers, introducing targeted support for affected territories, reserve mechanisms for financial stabilization, and transparent control over the use of funds.