In the first half of 2026, municipalities’ own revenues reached $4.8 billion. In most western, central, and northern regions, revenues grew by around 12–21% compared with last year, with the Kyiv region recording the strongest performance. At the same time, revenues fell by 21.7% in the Donetsk region and by 3.4% in the Zaporizhzhia region. This means that the gap between relatively safer regions and those most affected by the war continues to widen.

These findings are presented in the Municipal Review for the first half of 2026, prepared by the team of the Center for Public Finance and Governance Analysis at KSE Institute.

Personal income tax (PIT) remains the largest source of municipal revenue, accounting for 53.8% of all own revenues. In the first six months of the year, PIT brought municipalities $2.6 billion, up 15.1% year-on-year. The main driver of growth was an increase in the average monthly wage from $601 to $671. Unified tax revenues reached $762.4 million, up 5.6%, while the number of registered individual entrepreneurs exceeded 2.1 million. Land fee revenues amounted to $471.2 million, up 9.2%; excise tax revenues reached $402.6 million, up 20.7%; and real estate tax revenues totaled $108 million, 3% more than a year earlier.

Transfers from the state budget increased by 30.1%, but largely due to higher financing for responsibilities already delegated to municipalities. The education subvention rose by 29.5% following a 30% increase in teacher salaries, while the basic equalization grant increased by 15.4%. At the same time, the additional grant for municipalities most affected by the war fell by 47.4%. Total state transfers also declined in the Kherson region by 24.6%, the Kharkiv region by 13.8%, the Donetsk region by 6.9%, the Luhansk region by 6.8%, and the Zaporizhzhia region by 1.4%.

Total municipal expenditures reached $7 billion, up 15.5% year-on-year. Current expenditures totaled $6.3 billion, or 91% of total spending, while capital expenditures stood at just $477.6 million, or 7%, remaining almost unchanged from a year earlier. Education accounted for 51.7% of all expenditures. Expenditures on salaries and related payments increased by 21.9% to $3.87 billion and now account for 55.6% of total municipal spending. Transfers to development budgets fell by 60.6% to $219.3 million. At the same time, placements of temporarily available funds in bank deposits and domestic government bonds rose to $50.4 million — nine times the level recorded a year earlier.

Security pressure intensified sharply. In the first half of the year, 18,183 attacks were recorded in territories under Ukrainian government control, 40.6% more than a year earlier. There were also 4,238 incidents of damage to civilian infrastructure, an increase of 184%. More than 80% of attacks involved airstrikes and drones. This means that exposure to danger is becoming less dependent on proximity to the frontline. Residential infrastructure suffered the most: in the second quarter, 1,820 incidents of residential damage were recorded, up 184.4% compared with the same period in 2025. Damage to educational and healthcare facilities also increased significantly.

Frontline municipalities continued to bear the greatest burden: in the second quarter, they accounted for 91.7% of all attacks and 81.9% of civilian infrastructure damage. City municipalities experienced 42.8% of all attacks but nearly 70% of all recorded infrastructure damage.

In the first half of 2026, municipalities signed 86 cooperation agreements. In the second quarter, nearly half of them — 46.7% — involved delegating specific powers to municipalities with the necessary resources. This is particularly important for displaced and frontline communities. At the same time, the Government approved a $6.06 billion public investment plan for 2027–2029, including $1.75 billion for education and science, $1.63 billion for transport, and $1.04 billion for municipal infrastructure. This defined the requirements for projects in terms of alignment with national priorities and measurable results.