In this context, the reform of the LGcapital grants and municipal investment planning frameworkforms the main strategic actions undertaken by thegovernment towards the implementation of itsdecentralization agenda recently anchored in the newConstitution adopted in January 2014.This grant system,which had operated under an ex ante system of controls, isbeing restructured through the revision of the Decree97-1135 governing the LG capital grant system. Through therestructuring, the government intends to improve theefficiency of the state financial support to municipalinvestment, make the allocation of capital grants moretransparent and predictable, strengthen the decision-makingpower of LGs on the use of their investment funding, andprogressively introduce a performance based dimension totheir capital grant system. Along with revision of the abovedecree, the government has also issued a Ministerial Decreeto introduce participatory municipal investment planning andbudgeting systems, hence promoting citizen engagement inidentifying investment needs and priorities. Under the samereform, the government will progressively introduce anindependent, annual assessment to measure the performance ofLGs in line with the above amended decree. The performanceassessment system, in addition to serving as a tool formonitoring LG s performance, has proven to be a veryeffective means of incentivizing LGs to strengthen theirinstitutional performance, where access to grant funds islinked to results. The areas covered under the performanceassessment will include governance, sustainability andmanagement. The results of this performance assessment willbe used to adjust the capital grant allocation starting thethird year of the program.
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