As a large part of the SDGs will be led by local authorities, the creation of the global observatory on local finances will be crucial for the follow-up of fiscal decentralization, and local government financial capacities. It will also bring progress on transparency at the local level to the attention of central states and international partners.
Having access to accurate and reliable data on the financial situation of local communities is a major prerequisite for understanding the strengths and weaknesses of a system of fiscal decentralization. It will enable us to provide comparative data at the global scale, which in turn can serve as a tool for the analysis and positioning of countries in terms of institutional organization and fiscal decentralization, thereby enriching the inputs of local and national stakeholders on the reforms to be undertaken.
Yet, the range of instruments available for the international community to get a better knowledge of the financial health of local governments is very limited. Numerous initiatives are under way, but they don’t give a global vision of the state of local finances worldwide. Many countries do not even have their own national reporting system.
Therefore, we urge for the creation, together with our partners working on similar initiatives, of a common tool on local finances :
• A key instrument for the follow-up of decentralization processes;
• Transparency: a gateway to instruments for access to external resources (public-private partnerships, access to loans, to ODA, …);
• Comparing and sharing data: for approaching the diversity of national contexts and situations, the similarities and differences and getting richer from international experiences;
• A tool to support capacity building by peer to peer exchanges
• A tool for advocacy in favor of financing the SDGs.
Committee on Local Finance for Development / UCLG, OECD, UN Habitat, AFD, UNCDF, CCT of WAEMU, France
• 120 Country profiles gathering data and short comments on the situation of local and regional governments ;
• A comparative synthesis sorted by main indicators:
o Macro-economics indicators: inhabitants, GDP, Human Development Index, economic growth, …
o Qualitative indicators:
• Institutional indicators: Structure of the state (unitary, numbers of levels of local governments, …);
• Responsabilities ;
• Tax system
o Financial indicators:
• Composition of revenues (taxes, fees, transfers, …)
• Composition of expenditures (personnel, utilities, debt repayment, …);
• Expenses by sectors (education, health, …);
• Gross and net savings rate ;
• Financial autonomy rate ;
• Investment effort ;
• Level of self-financing of the investment ;
• debt burden ;
• Debt reduction ability.
• In order to improve the observatory of local finances, a study will bring out country by country analysis, the difficulties in gathering data, opportunities for updating, as well as issues relating to reliability and comparability. On this basis, the partners will be able to help countries that request it to progress in the constitution of their own national database. Eventually, the observatory will constitute a platform for exchange, analysis and capacity building through exchanges between local governments and countries.
The goal is to get at first the data on the financial situation of local authorities in 80 countries.
For countries with national accounts consistent with that of the OECD countries, the project will rely on the data from the national accounts. Comparability between these countries will be provided with optimal reliability. Over 55 countries should be concerned (34 OECD countries, non-OECD countries 8 EU, Morocco, Tunisia, Colombia, Brazil, Peru, Costa Rica, Latvia, Lithuania, Kazakhstan, India, Indonesia, Thailand, Republic of South Africa, Kenya, Tanzania).
For other countries where local government accounts may be collected from nationally consolidated basis, the reliability of data and comparisons will be made more randomly, but they will nevertheless provide relevant information on the situation of local finances .
Following this work, a review will be carried out in order to see how to improve from a quantitative (120 countries) and qualitative (better reliability and comparability) points of view. Thereby, the platform for the exchange and analysis will be effective and seminars will be organized at different levels: natinonaux, regional and global levels.
• Human resources are provided by UCLG / Committee of Local Finance for Development.
• The expertise and data processing is provided by the OECD on financing of UCLG.
• This project led by UCLG is currently funded by the AFD, the French Ministry of Foreign Affairs and the City of Rabat. Other development partners are expected to join the project as UN Habitat, as well as several Regionales Development Banks.
1st phase from July 2015 to Juanuary 2016 (80 countries) and second phase to be lounched by March 2016