Intergovernmental fiscal relations haveadvanced over the last decade in the Kyrgyz Republic. Sincethe previous public expenditure review in 2004, thegovernment of the Kyrgyz Republic has developed a number ofpolicy changes in the area of intergovernmental fiscalrelations. These policy changes helped the country tointroduce a more transparent and equitable system of localgovernment financing. Still, effective decentralizationcontinues to face challenges. A set of policyrecommendations for the government to consider are designedto clarify the role of local government and provide betterincentives for improved service delivery. These are based ona review of the four pillars of intergovernmental fiscalrelations in Kyrgyz Republic: (i) the expenditure assignment(of who does what); (ii) revenue assignment (with whatresources) assignment; (iii) the system of transfers; and(iv) borrowing. In this context, the report is structured asfollows: section one gives executive summary. Section twoprovides a brief description of the institutional context interms of the structure of government and the elements ofpolitical and administrative decentralization. Section threeanalyzes the delineation of expenditure responsibilitiesamong government tiers. Section four analyzes revenuesources assigned to each tier of government. Section fivefocuses on the system of intergovernmental transfers.Section six examines subnational public investments andborrowing. In each of these sections main issues andproblems are identified in the current system and thedesired directions for reform are pointed out.
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