HISTORICAL EVOLUTION OF UKRAINE’S PUBLIC FINANCES: FROM SOVIET LEGACY TO CONTEMPORARY TRANSFORMATIONS DURING MARTIAL LAW

Abstract

This article is devoted to analyzing the evolutionary changes in the structure, organization, and functioning of Ukraine’s public finance system within the context of historical transformations that began during the Soviet era and have acquired particular urgency under current martial law conditions. The author conducts a retrospective review of the budgetary system, highlighting the features of a centralized financial management model based on directive planning, strict control, and paternalistic approaches to resource allocation. The analysis demonstrates how the legacy of Soviet financial policy has laid the groundwork for the persistence of excessive centralization and institutional remnants that continue to affect modern budget formulation and management processes. Special attention is given to the reform period of the 1990s through the early 2000s, when the implementation of fiscal decentralization principles, program-targeted budgeting, and the gradual expansion of local budgetary authority marked a significant step in modernizing the system. However, the traditional models of centralization entrenched during the Soviet period still create tensions between the need for effective public finance management and the imperatives of democratization and European integration. The article further examines the consequences of martial law, which has prompted a sudden realignment of budget priorities—concentrating financial resources on defense capabilities and social protection, reducing the autonomy of local authorities, and increasing regional dependence on centralized management. Employing a comprehensive methodological approach that combines historical, institutional, and structural-functional analysis, the study identifies the key factors impeding the adaptation of the financial system to contemporary challenges and formulates practical recommendations for overcoming these issues. The findings underscore the necessity of developing a new model of public finances that achieves a balance between centralization and decentralization, enhances transparency and efficiency in budget management, and promotes economic stability at both the national and local levels. The practical significance of the study lies in its potential to inform the development of a long-term financial policy strategy that accounts for both historical prerequisites and the current security and economic realities of Ukraine.