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Albanian Mayors and Minister of Finance and Economy Discuss on Key Achievements and Next Steps for Fiscal Decentralization Reform.

On April 17th, on the first anniversary of the adoption of Law on Local Self-Government Finance (LGFL), the USAID Planning and Local Governance Project, in partnership with the Ministry of Finance and Economy (MoFE), conducted a National Conference “The Law on Local Self-Government Finance – One Year Later”.

The objectives of the conference were:

  • Discuss the fiscal decentralization reform enacted by the government and the main achievements in local government finance;
  • Review challenges and opportunities that local government face after the passage of the LGFL and on the eve of the Property Tax Reform;
  • Assist the national and local governments to set “next steps” to improve policies, legislation, and processes that strengthen local governance and advance fiscal decentralization; and,
  • Promote a non-partisan dialogue between the national and local governments on outstanding issues on local government finances.

The Minister of Finance and Economy, Mr. Arben Ahmetaj, recognized the Territorial and Administrative Reform constitutes the biggest change in Albania’s administrative system since 1992, holding on the promise of improving the efficiency and effectiveness not only of local government, but also of the Albanian state as whole. From this perspective he also recognized the LGFL to be a major achievement in Albania’s process of decentralization showing the Government’s commitment to support decentralization reforms. In fact, the LGFL increases local government revenues from the unconditional grant and shared taxes by more than 37% compared to the historical average of the past decade, providing an excellent opportunity to improve service delivery and increase capital investments for more local economic development opportunities.

While recognizing the support of the national government, mayors raised their concerns over the need for more clarity on the strategy and next steps for the upcoming property tax reform and measures that would address the structural weaknesses in local tax administration, the possibility of obtaining support from the national government in clearing out local governments’ payment arrears, and eventually the revision of the unconditional grant formula or the introduction of a new financing instrument to support the least advantaged municipalities that are suffering major depopulation waves.

The well-attended conference proved an excellent occasion to foster an open and inclusive intergovernmental dialogue on fiscal decentralization reform. Both national and local governments recognized the great progress made with the LGFL. However, the fiscal decentralization reform initiated with the LGFL needs to be completed with additional measures and reforms, in particular the property tax reform and the related fiscal cadaster.

“I want to recognize USAID’s merit of being a leader in promoting and pushing forward the process of decentralization and autonomy of democratically elected local governments” Arben Ahmetaj, Minister of Finance and Economy

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