This report reviews intergovernmentalfiscal relations in Moldova and recommends ways to improvethe efficiency and equity of local public finance, whilemaintaining fiscal sustainability. Local public authoritiesare responsible for meeting key public service deliveryneeds. They play a major role in education and bear primaryresponsibility for urban and rural functions such as watersupply and local road construction and maintenance. Butlocal authorities are unable to fulfill this role due tosub-optimal size, inadequate financial capacity, and lowadministrative capacity. The Government of Moldova isreforming intergovernmental fiscal relations, as part ofbroader commitments under the national decentralizationstrategy (2012). They set new rates for sharing nationaltaxes with the two tiers of local government, introduceformulas for transfers to local governments, and removesubordination in financial relations between top and bottomtiers of local government. This report reviews recentreforms in local public finance and makes suggestions tofurther improve subnational expenditures, fiscal policy, andbudgetary processes. Suggestions are made in five key areas:(i) address the inefficiencies of expenditures related tothe high fragmentation of Moldova'sadministrative-territorial organization; (ii) improve theefficiency and equity of intergovernmental transferformulas; (iii) help develop the revenue capacity of localgovernments; (iv) improve public investment management atthe local level; and (v) ensure sustainability ofsubnational debt.
PDF
download
878987797
028-85220240
