MECHANISM FOR IMPLEMENTING REGIONAL FINANCIAL POLICY FOR THE MODERNISATION OF REPRODUCTION PROCESSES

Abstract

The purpose of the article is to substantiate a mechanism for implementing an investment-stimulating regional financial policy capable of shifting the sources of territorial financial resources from blocked and latent activity regimes towards peripheral and core ones under the conditions of a wartime and recovery economy. The methodological framework combines system-structural analysis of the three-block architecture of the mechanism, comparative legal analysis of the acts that govern regional development and intergovernmental fiscal regulation, statistical analysis. The study demonstrates that the binding constraint on regional financial policy is not the absence of legal norms but their inconsistency and the lack of implementation mechanisms. Four institutional gaps are identified: the spatial effect of financial decisions is not measured; the dedicated capital channel is funded only symbolically; the debt channel remains de facto inaccessible to the overwhelming majority of communities; and a statutory war-risk insurance system is absent. Capital investment recovered to UAH 669.3 billion in 2025, yet more than 71 % of it was financed from the own funds of enterprises and the reinvestment ratio reached 49.7 %, which indicates that extensive growth of this source is nearly exhausted. Approximately 14 % of the total investment effect materialises outside the recipient territory, confirming the presence of interregional spillovers that the current policy design ignores. The object of policy influence is redefined as the intersection cell "source – territory" with its specific activity regime, while policy performance is measured by the increment of investment with allowance for spatial effects. An index of reproduction burden is proposed for the spatial differentiation of transfers, State Regional Development Fund support and tax incentives. It is argued that fiscal and credit instruments should be functionally separated: the former build the investment potential of the own funds of business entities, whereas the latter reduce the risk component of the cost of borrowed resources. Priority is given to regulatory and information-infrastructure measures of low resource intensity and a short-term implementation horizon.