Financial decentralization as a precondition of increasing the local governance capacity in Ukraine

Abstract

Modern period of Ukrainian development is characterized by extended process of local governance and administrative-financial decentralization reforms, as well as a set of sectoral reforms that started in 2014. The process, which can generally be characterized as the decentralization process, has become the driving force directed at improving the level of territories’ socio-economic development and strengthening the local governance capacity in Ukraine. It is grounded on growing financial autonomy of local authorities, expansion of the list and improving quality of public services granted to residents, and meeting the needs of territorial communities in all activity domains. The paper aims to examine the process of financial decentralization as a precondition of increasing the capacity of local governance in Ukraine. The paper determines that local finances are the process of making financial and investment decisions according to the planned tasks and sources of maintenance. It reveals that the sources of financial provision of territorial communities stipulate the forming of local budgets’ revenues in time based on real processes. The approach contributes to avoiding the excessive expenses and more distinct but rather short-term predicting of budgets composition, as well as optimal defining of funding priorities for corresponding activities. The structure of funding sources in Ukraine is analyzed. The weight of local budgets’ revenues in the structure of Ukraine’s consolidated budget in 2014-2018 is determined. The fact that financial decentralization as one of the key reforms is directed at strengthening of financial-economic capacity of territorial units based on the principles of autonomy, self-sufficiency, and efficiency is emphasized.