Importance In modern conditions of instability, the importance of financial policy increases. The ultimate outcome of its implementation should be the satisfaction of needs of the population. Each subject of the State and municipal finance system should respect the boundaries defined by relevant powers and authority, when developing the financial policy and socio-economic development strategy. Objectives The aim of the study is to test my hypothesis about the existence of specific features of financial policy formation at the municipal level that are important for the entire system of State and municipal finance. Methods I employ methods of logical analysis and systems approach. Results The paper reveals the specificity of municipalities’ policy as an element of the system of State and municipal finance, identifies differences in the financial potential of local governance. The existing procedure for financial base formation of local self-government bodies has limitations in the ability to meet the needs of the local community. This, in turn, potentially threatens the sustainability of municipality’s social and economic system. The Quebec case demonstrates a possibility of escalating the threat from the local to regional level. Conclusions It is necessary to develop a unified approach to the formation of municipal financial policy, considering all its areas, and to remove the existing restrictions of this process. Local governments will be able to liquidate resentment at the local level through local finance, preventing its expansion to the regional level that jeopardize the stability of the entire system.
Keywords: financial policy, strategy, systems approach, municipal financial policy