In 2017, a resident of the Republic of Moldova had an average of 3,791 lei from local budget revenues. The highest per capita income was in Briceni (2.8 thousand lei), Sipoteni (2.7 thousand lei) and Ungheni municipality (2.4 thousand lei). However, local budgets in our country remain critically insufficient to ensure the sustainable development of local communities. These are some of the findings of the local public finance quality assessment report.

The analysis, signed by Angela Secrieru, public finance expert at IDIS "Viitorul", evaluates the capacities of local government in the field of local public finances in the 50 largest localities in the Republic of Moldova.

"Financial centralization is becoming more pronounced and alarming. This trend affects, among other things, the independence of local public authorities in local decision-making, generating distorted premises for the development of certain localities to the detriment of others, often induced by political reasons, eventually leading to an increase in the decline of local economies”, believes Angela Secrieru.

According to the local finance assessment report, the size of the administrative-territorial units' revenues was 13,462 million. lei, representing 7.6% of GDP in 2017, and the total expenditures of the local budgets amounted to 13 274 million lei last year. The localities (with the exception of Chisinau and Balti), with the highest incomes, were Cahul (81 million lei), Ungheni (77 million lei) and Orhei (59 million lei). The same towns also recorded the largest revenues from local taxes in 2017. Tax on real estate is, however, the source with the most significant financial potential that feeds local budgets. This source generated the highest revenues in the case of the budget of Cahul (4.7 million lei) and Codru (3.9 million lei). However, in 2016-2017, local taxes and fees recorded unimportant values (about 6%), caused in particular by the passivity of local authorities, the unfavorable political and economic environment. Although own revenues are associated with financial decentralization and the independence of local public authorities, most of the total local budget revenues come from transfers from the state budget. In this case, the largest transfers were registered last year at the level of the budgets of Cahul, Ungheni and Comrat.

As far as spending in 2017, most money was spent on staff, goods and services. Thus, the largest personnel expenditures in the total budget expenditure structure were recorded for the Pelinia budget (54%), Congaz (53%) and Taraclia (51%).

"The share of own revenues in the total local budget revenues is not only insufficient, but is steadily decreasing. One of the possible explanations for these developments is the reluctance of local public authorities to manifest their initiative and activism in the development of local economies, as well as the high number of cases of criminal prosecution against local elected officials under the pretext of the anti-corruption fight", the expert says.

Strengthening the revenue base of local public authorities, streamlining the allocation of all categories of transfers, increasing the tax rate of local taxes and taxes, revising the system of tax incentives and granting local public authorities the freedom to introduce new local taxes and taxes are some of the solutions recommended in the report to ensure financial health and sustainable economic growth at the local level.

The budgetary transparency of local public authorities in the Republic of Moldova can be accessed on the open data portal http://localbudgets.viitorul.org/

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The analysis was developed within the initiative „Promoting transparency and financial sustainability of regional policies, state-owned enterprises and local authorities in Moldova", implemented by IDIS "Viitorul",  in partnership with the Institute for Economic and Social Reforms in Slovakia (INEKO). The initiative is financially supported by the SlovakAid. It aims to improve the efficiency of the state administration, self-government and civil society in the area of creation and control of regional policies, administration of state-owned enterprises, and monitoring of budgets and information openness of municipalities.

For details, contact Ana – Maria Veverița: ana.veverita@viitorul.org or at the phone number  (0 22) 221844.