Sustainable financing of municipalities, a sure step towards development and well-being

At the invitation of the Ministry of Finance of the Republic of Albania, representatives of the KLGI Institute took part in the national conference “The Law on Local Self-Government Finances – One Year On”. Minister Arben Ahmetaj and senior representatives of USAID and SDC presented at the conference on the achievements, challenges and next steps for the implementation of the Law on Central Self-Government Finances.

The conference stressed that the Law on Local Self-Government Finances, together with the Law on Local Self-Government, are the two basic pillars of the efficient functioning of local government. The new regulation on local finances establishes three basic principles: autonomy; fiscal and financial discipline; and mechanisms for open intergovernmental dialogue.

On the panel, Mayors of Municipalities (Bashkis) and representatives of international organisations presented the successes following the implementation of the new Law, stressing that it has enabled them to achieve sustainable financing of services, long-term development projections and at the same time discipline, accountability and transparency.

Nevertheless, three issues still remain challenging: first, debts inherited from one mandate to the next; second, the implementation of property tax; and third, specific support for areas with weak economic capacities.

Regarding inherited debts, Minister Ahmetaj encouraged local government to programme the repayment of obligations accurately, following the vision of the central level in this regard. Throughout the process of drafting and implementing the new Law, the extensive support of international expertise was appreciated, as was the inclusiveness of the process. A major challenge is that a considerable part of the budget frameworks of the Municipalities (Bashkis) relates to administrative salaries, while the capital investment portion does not secure sustainable financing.

At the conference, the Acting Executive Director of the KLGI Institute, Mr Besnik Muçaj, stressed that, unlike Albania, Kosovo has over time had more sustainable instruments for financing municipalities as well as municipal capacities to collect revenue. However, 10 years after the implementation of the Law on Local Government Finances, there is a need for changes to policies and legislation in this field in order to ensure adequate financing of municipal services and to open up prospects for sustainable development. In this regard, Albania has made particular progress in fiscal autonomy related to the collection of tax and personal income.

In separate meetings, Mr Muçaj had the opportunity to discuss with senior institutional representatives and international partners supporting Albania in this field, so that in joint engagements with Kosovo's municipalities they can adopt the good practices implemented in Albania, such as that of the “EU for Municipalities” project. On this occasion, as a continuation of joint engagements, the KLGI Institute will host the Agency for the Support of Local Self-Government as well as the Association for Local Autonomy of Albania in order to learn about and exchange practices from both countries at the local level.

Representatives of the Ministry of Finance of Albania expressed their readiness to hold joint meetings, under the coordination of the KLGI Institute, with institutional representatives from Kosovo in order to exchange good practices in the process of drafting policies and legislation in the field of local finances.