Resource information
Albania has undertaken major reforms in
its system of local government finance since 2000. What had
been a system in which local functions were ambiguous and
financing was largely provided through tightly controlled
earmarked grants is now one in which functions are
relatively clear and local governments have more autonomy
over the allocation of funds. A new system of competitive
grants for infrastructure investment has been introduced.
Parliament has enacted a new law on local borrowing. Within
this framework, however, several controversies remain which
are addressed in this policy note. In the long term Albania
must also grapple with certain organizational issues. One is
the role of regional governments, which now lack any major
clearly defined function. While the Government's
decentralization strategy proposes a range of possible
functions for regional governments, most of these roles
could be carried out through other means. The other
organizational issue is the consolidation of small communes.
The Government's decentralization strategy proposes the
eventual consolidation of small local governments into
larger units. International experience, however, suggests
that the efficiency gains of consolidation are limited and
may not be sufficient to justify the political costs of
doing so. Efforts to consolidate local governments should
consider alternative solutions such as inter-municipal
agreements and joint service companies before proceeding.
