TREASURY SERVICE IN CONDITIONS OF MARTIAL LAW AND RECOVERY BASED ON BEST PRACTICES

Abstract

The research addresses the unprecedented challenges facing Ukraine's Public Financial Management (PFM) system, specifically the State Treasury Service of Ukraine (STSU), due to full-scale military aggression. The core problem is identifying an optimal model for institutional and technological modernization of the STSU that effectively transitions from crisis management to transparent, accountable post-war recovery based on international best practices. The study aims to develop a comprehensive model for STSU modernization, grounded in sequencing PFM reforms in a post-conflict environment to ensure sustainable recovery. The analysis reveals that the STSU successfully adapted operations during martial law by implementing stringent prior expenditure control and ensuring business continuity through its remote service system (SDO). However, this high operational resilience coexists with critical technical fragility, particularly the reliance on outdated IT infrastructure (AS «Kazna-V»), posing significant cyber and fiscal risks that jeopardize large-scale international funding control. A major fiscal challenge is the effective fiduciary control over significant international financial assistance, such as the EU's Ukraine Facility, which necessitates compliance checks (e.g., Dual Financing Check). The escalating public debt service burden further pressures the STSU to maintain centralized liquidity management. Drawing on international PFM models (IMF three-step process) and European post-conflict reconstruction experience, the paper offers strategic recommendations. The case of Croatia illustrates the necessary transition from centralized wartime cash control to performance-oriented PFM, emphasizing results-based evaluation for capital expenditures. The Polish case underscores the critical need for prioritized and rapid modernization of core payment and accounting systems to secure macroeconomic stability during transition. Conversely, Bosnia and Herzegovina's experience highlights the dangers of institutional fragmentation, reinforcing the necessity of maintaining a strong, centralized Treasury Single Account (TSA) under the STSU to mitigate corruption risks during decentralization efforts. The conclusion is that the STSU's institutional strengthening is inseparable from its technological modernization. Immediate replacement of the legacy IT infrastructure is paramount. The study recommends implementing an integrated, real-time TSA platform and institutionalizing automated fiduciary control mechanisms to comply with donor requirements. Ultimately, the modernization of the STSU is not merely an administrative task but a crucial geopolitical imperative to guarantee donor confidence and ensure the transparent, effective use of reconstruction funds.