Municipal and Intergovernmental Finance

In the run-up and aftermath of President Hamid Karzai's election to a second term in office, increasing attention is being paid to the ineffectiveness and dysfunction of the public sector in Afghanistan. This Policy Brief describes the characteristics of the current intergovernmental system and the burden it places on the delivery of citizen-focused services. Suggestions for steps that donors can take to address the paradox of having excessive central control in a state that is very weak are suggested at the conclusion.

This study analyzes the funding of local governments in Macedonia today, and whether the current intergovernmental fiscal system provides adequate funding to the local government level. The study relies on a new local government finance database to present a picture of how local government finances have evolved over the last three years, and provides a concrete proposal for initial reforms that would improve the adequacy, efficiency, and equity of intergovernmental financial relations in Macedonia.

Decentralization and intergovernmental finance have been a common element in international development efforts for many years. However, the success of fiscal decentralization as a development strategy is decidedly unclear, and there is growing skepticism about the effectiveness of (fiscal) decentralization as an international development strategy. This short essay explores the current state of knowledge with respect to fiscal decentralization and assesses the relevance of fiscal decentralization to the wider international development agenda, using the fiscal aspects of decentralization as an entry-point into the broader discussion of decentralization.

The purpose of this note is to help both local and national government officials think through possible strategies for addressing one of the fundamental issues facing Serbian municipalities today: How do Serbian local governments increase the revenues they need to improve their public infrastructure while simultaneously creating an environment favorable to private investment and local economic development? This is a dilemma that local governments face throughout the world but which is particularly pressing in many developing and transition countries where local governments must address huge deficits in urban infrastructure without at the same time over taxing their business communities upon which their future growth depends. It is also of particular importance in Nis, the third largest city in Serbia and the economic engine of the southern and least developed part of the country.

For the public sector to deliver public services and achieve its policy objectives, it is critical that public finances are managed well. Critics of decentralization point out that local governments are often administratively weak, and that poor local financial management can negate the potential benefits from decentralization. While the available research suggests that local financial management outcomes are influenced by more than a local government’s financial management practices, little is known in the literature about the determinants of effective local financial management in developing and transition economies. The empirical analysis in this paper uses data for local government authorities in Tanzania in order to explore the relationship between local financial management performance on one hand, and local management practices, local governance, and other local characteristics on the other hand.