Municipal budgets must become an instrument of sustainable development

At the premises of the KLGI Institute, the Executive Director, Mr Besnik Tahiri, and the Programme Manager, Mr Besnik Muçaj, presented an analysis of the overall budgetary situation and the municipalities’ lines of operation in relation to budget spending. Particular emphasis was placed on the comparative aspect of budget trends and their development prospects, as well as on the challenges, successes and prospects regarding the collection, management and spending of financial resources by municipalities.

It was first noted that the Law on Local Government Finance and the laws regulating local government are an outcome of the decentralisation process from 2008. Because of their high and in-depth level of oversight and monitoring, these laws were considered quite practical at the time, reflecting a need for mentoring and supervision.

However, eight years on, this law and the other laws related to municipal development need to be reviewed and rethought with a view to advancement; otherwise, they are effectively treating the municipality as a weak pupil. Consequently, there is a need to change the overall framework of the law on local government finance and to review the legislation, given that municipalities now have broad autonomy and inadequate funding directly affects their functioning.

Furthermore, it was stressed that decentralisation can succeed, and the system of municipalities as it now stands can function, only if there is adequate and sustainable funding. Among other things, it should be noted that only 18% of municipal budgets comes from own-source revenue, with the rest coming from the central level, which means there is a heavy dependence on the central level and on certain ministries. Finally, recommendations were presented on the measures to be taken for better management and a new approach to financing.

The recommendations are as follows: the law on local government finance should increase the fiscal autonomy of municipalities; an analysis of primary and secondary legislation should be carried out with a view to harmonising competences with finances; budget circulars should be brought up to date, becoming a mechanism of sustainable development; new funding opportunities should be explored, and the process of drafting the Law on Balanced Regional Development should take into account the reduction of regional development gaps.