There is money in the accounts of Ukrainian cities, but they cannot spend it. The Association of Ukrainian Cities demands the government to immediately resume payments blocked since September 9, from fuel for emergency services to equipment for preparing for the heating season. The amount of suspended payments is estimated at approximately 20 billion UAH. This resembles a cash stress of the state, but the claim that Kyiv is literally using municipal money to finance the army requires evidence. Far more important is another aspect: on the eve of winter, the state received money that legally exists, but temporarily ceased to exist economically.
The Ukrainian budgetary system has encountered a strange kind of deficit. Cities have money. Expenditures are provided for in local budgets. According to the Association of Ukrainian Cities (AUC), payment orders correspond to the government's resolution No. 590, which defines the sequence of treasury payments during martial law. However, municipalities cannot execute part of the payments.
On October 1, the AUC board appealed to Prime Minister Serhiy Koletsky, demanding the immediate unblocking of payments. According to the association, the restrictions have been in place since September 9. Because of this, municipalities cannot pay for fuel for emergency vehicles, work and equipment for hospitals, schools, and social institutions, as well as measures to prepare for the heating season and implement resilience plans.
This is no longer an accounting inconvenience. This is a moment when accounting starts to impact physical infrastructure.
Money Exists. Liquidity Does Not
In a normal situation, the phrase “there is money in the account” means that the owner can use it. The wartime treasury system is more complex. Funds from local budgets pass through the State Treasury Service, and resolution No. 590 defines the priority of expenditures. Therefore, the existence of a budget surplus does not guarantee that the payment will be made today.
According to AUC advisor Oksana Prodan, the suspended payments for municipalities amount to about 20 billion UAH. The association connects the situation with savings and funding shortages. It was separately reported that on September 28, the Prime Minister announced a halt to funding for capital expenditures due to a budget shortfall and delays in part of the expected external funding.
This makes the version of general cash stress quite logical. But it is important not to skip over one level of causality.
The delay in municipal payments does not in itself prove that the Treasury took 20 billion UAH from the cities and directly transferred it to pay military salaries or purchase weapons. Such a conclusion requires data from the Ministry of Finance and the Treasury about the movement of the Single Treasury Account.
However, the economic effect for a city from this difference is small. If a municipality has 100 million UAH, but today it cannot pay for a generator, fuel, or repair heating networks, for the supplier, this 100 million temporarily differs nothing from zero.
There is a budget resource. Payment capability does not exist.
The Worst Month for Savings
At any other moment, a payment delay would primarily mean a quarrel between the mayor and the Ministry of Finance. At the beginning of October, it transforms into an infrastructure risk.
The AUC claims that the blockade has affected payments to suppliers of electricity and fuel, repair crews, water supply, and waste disposal enterprises. The association separately warns of payment problems for energy protection measures, eliminating the consequences of missile strikes, restoring critical infrastructure, and preparing for the heating season.
It is here that the financial problem could start to scale up.
In a peaceful system, repairing a heating pipeline can be postponed for a week. In the War 4.0 system, that very week can find itself between a missile strike and a sudden cold snap. The city needs not only reserves of equipment but also the ability to immediately buy cable, pipes, transformer equipment, diesel fuel, batteries, or pay contractors.
Infrastructure resilience, therefore, consists not only of megawatts.
It also consists of the speed of payment.
Free Credit to the State?
For the central government, the temptation to manually manage liquidity is understandable. During wartime, budget priorities are extraordinarily strict. Military salaries cannot be postponed until the next quarter. Munitions are needed now. Part of social expenditures is also protected. If the expected external tranche is delayed, the Ministry of Finance must decide not only how much the state will spend over the year but also who it will pay this Tuesday.
This is precisely why treasury liquidity differs from regular budget deficits. The state can have approved funding on paper and at the same time feel a temporary shortage of liquid funds at a specific moment.
But for local self-government, the outcome looks different: the city has collected revenues, formed a budget, has a surplus in its account - and still has to wait for permission from the central system to use its own resources.
Economically, this begins to resemble an interest-free forced liquidity loan, even though legally the funds remain the funds of the relevant budget.
And the longer the blockade lasts, the less academic this difference becomes.
The Old War of Kyiv and the Mayors
The current dispute did not arise in a vacuum. Financial relations between the center and communities have been strained for several years. One of the main conflicts has been the extraction of the so-called military and security personal income tax (PIT) from local budgets. The AUC continues to demand its return to communities or compensation for losses; during consultations on the 2027 budget, the association also advocated for permanently securing 64% of the PIT for communities and stopping the extraction of reverse subsidies.
The central government has its own logic. In wartime conditions, concentrating some of the revenues allows directing more resources to national-scale defense procurements. Part of the previously extracted military PIT, for example, was legislatively directed toward the purchase of special equipment and the development of the defense industry.
The mayors see another side of the balance. It is the communities that maintain heating networks, water supply systems, hospitals, emergency services, shelters, and a significant part of the infrastructure that first encounters the consequences of attacks.
Both sides are effectively financing one war - just on different floors.
Political Stretching
Here arises another dangerous attribute of treasury blocking: it blurs responsibility.
If a heating network breaks in the city in winter, voters see the mayor. If the water supply system fails - the director of the utility enterprise. If an emergency crew is delayed - the local authorities. The state treasury remains invisible to most citizens.
The local authorities, in turn, receive a ready argument: there was money, but Kyiv did not allow them to spend it.
It would be premature to assert that the central government deliberately creates such a structure to later shift responsibility onto the mayors. There is no public evidence of such a political design. But the system itself objectively creates such a conflict of responsibility.
The center controls the payment.
The mayor is responsible for the radiator.
Cash Gap as a Symptom
The most important aspect of the AUC's demarche is not the figure of 20 billion UAH itself. For the wartime state budget, it is not system-forming. Much more interesting is which payments had to be postponed.
When the state begins delaying not decorative projects, but fuel, repairs, energy equipment, and preparations for winter, it may be a sign that the space for painless maneuvering of liquidity is narrowing. But the final conclusion about the scale of cash deficit requires data from the Ministry of Finance and the Treasury, not just statements from one side of the conflict.
At the same time, communities are entering the 2027 budget with a broader list of claims. They demand the return of part of the PIT, stopping reverse extractions, settling the debt on tariff differences, which the AUC evaluates at 85 billion UAH, and additional resources for territories affected by the war.
Thus, the current 20 billion UAH is not an isolated incident. It is yet another episode of a much larger dispute about where, during the war, the financial autonomy of the city should end and the state's right to concentrate resources should begin.
Winter on the Unified Treasury Account
Ukraine is preparing for the heating season, during which three deficits will simultaneously exist.
The first - physical: generators, transformers, gas, electricity, repair materials. The second - military: air defense missiles capable of protecting this infrastructure. The third - financial: money that must pass from the budget account to the enterprise capable of repairing the damaged object at the right moment.
The first two have long been discussed as part of the war.
The third seems like boring accounting - until the moment when a generator stands in the supplier's warehouse, funds lie in the city's account, and the Treasury does not execute the payment.
That is why the AUC's dispute with the government is much more important than the next conflict between Kyiv and the mayors. It shows the limits of the centralization of the wartime economy: the state can concentrate liquidity for the most important tasks, but if it squeezes financial capillaries too tightly, savings at the center begin to create accidents on the periphery.
Before winter, Ukraine needs not only megawatts, missiles, and billions. It needs billions to be timely converted into megawatts.