The Ministry of Finance and Economy Prepares for the First-Time Multiyear Projections of the Unconditional Grant for Each Municipality.
The adoption of the Law on Local Self-Government Finance (LGFL) allows not only for a substantial increase of the unconditional grant but also for more stability, predictability, and transparency in resource allocation.
This year, with the support of the USAID Planning and Local Governance Project, the Ministry of Finance and Economy (MoFE) prepared and published multiyear projections of the unconditional grant for a three-year period for every single municipality. The projections prepared by the MoFE will support local governments’ efforts to prepare their midterm budget programs for 2019-2021. The fact that municipalities will know in advance the amounts they are going to receive over a three-year time span definitively improves the process and reliability of local budgets, while substantially reducing the creation of payment arrears and other fiscal risks. The ultimate impact will be improved budget efficiency and reliability and fiscal discipline. The development and publication of the three-year unconditional grant projections are made possible only because of the provisions of the LGFL (that anchors and guarantees the size of the grant from year to year) and the new formula for the allocation of unconditional grants (that determine the criteria to be used to allocate funds for municipalities) developed by the MoFE with the crucial support from the USAID Project between 2015 and 2017.
“The development of multiannual projections of the unconditional grant -the single most important source of revenue for the vast majority of municipalities- is critical for the efficiency and effectiveness of local budgets. This is made possible by introducing in the LGFL the rules that determine the size and the criteria to be used for the allocation of the grant” – Fran Brahimi, Director of Municipal Finance Department at the Ministry of Finance and Economy.