As municipalities increasingly seek additional resources to support reconstruction, infrastructure development, and investment projects, effective municipal borrowing has become an increasingly important policy issue.

This analytical paper ‘Enhancing Municipal Borrowing in Ukraine: Recommendations from the Focus Group Meeting’, prepared by Polaris experts in cooperation with researchers from the Institute for Economics and Forecasting of the National Academy of Sciences of Ukraine, examines this issue.

Municipal borrowing in Ukraine remains at an early stage of development. Most loans and municipal bond issuances are concentrated in large cities, while smaller hromadas have limited access to these financing instruments. This constrains their financial capacity and opportunities for long-term development.

The analytical paper examines:

• trends in Ukraine's municipal borrowing market during 2021–2025;
• institutional, regulatory, and financial market barriers that limit municipalities' use of loans and municipal bonds;
• key risks faced by both lenders and borrowers;
• how European experience can help Ukraine strengthen its municipal finance system.

Drawing on data analysis and the findings of a focus group involving representatives of municipalities, financial institutions, and the expert community, the paper puts forward practical recommendations to strengthen Ukraine's municipal borrowing framework. These include:

• streamlining borrowing approval procedures;
• improving transparency and establishing clear and predictable rules for local governments;
• strengthening municipal creditworthiness through revenue diversification and sound financial planning;
• ensuring an appropriate balance between access to financing and fiscal discipline to minimise risks to local budgets.

The publication will be of particular interest to local governments seeking to diversify financing sources for infrastructure and development projects. It provides practical guidance on how municipalities can make better use of borrowing instruments, adapt international best practices, and strengthen their long-term financial resilience.

Read the analytical paper here.