Local budgets in Ukraine during wartime: Challenges, adaptation strategies, and the role of participatory budgeting

Type of the article: Research ArticleAbstractThe Russian invasion of Ukraine has reshaped the functioning of local budgets, creating fiscal challenges for municipalities while simultaneously testing the resilience of the decentralization reform launched in the pre-war period. This study examines the dynamics of local public finance in Ukraine during wartime (2022–2024), focusing on revenue fluctuations, expenditure restructuring, and the emerging role of participatory budgeting as an adaptive tool for community engagement. Using official data from the Ministry of Finance, the State Statistics Service, and the Open Budget Portal, the analysis compares fiscal indicators before and during the full-scale war. Case studies of selected municipalities highlight divergent strategies between frontline and rear communities in balancing defense-related needs, social support for internally displaced persons, and development priorities. Despite reduced revenues and rising security expenditures, local budgets remained stable, largely due to the decentralization framework. In addition to domestic revenues, local budgets increasingly relied on external inflows: international grants, loans, and non-repayable donor assistance. These instruments served as a critical buffer that compensated for the wartime decline in municipal revenues and stabilized key public services. We further examined how these external resources shaped the fiscal resilience of Ukrainian municipalities under wartime conditions. Moreover, participatory budgeting, though often suspended, proved to be a potential mechanism for maintaining public trust and civic involvement under crisis conditions. The study argues that “wartime participatory budgeting” represents a novel phenomenon with implications for both crisis governance and post-war reconstruction.